Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see QUALCOMM Incorporated (NASDAQ:QCOM) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. This means that investors who purchase QUALCOMM's shares on or after the 6th of March will not receive the dividend, which will be paid on the 27th of March.

The company's next dividend payment will be US$0.85 per share. Last year, in total, the company distributed US$3.40 to shareholders. Calculating the last year's worth of payments shows that QUALCOMM has a trailing yield of 2.2% on the current share price of US$157.17. If you buy this business for its dividend, you should have an idea of whether QUALCOMM's dividend is reliable and sustainable. So we need to investigate whether QUALCOMM can afford its dividend, and if the dividend could grow.

See our latest analysis for QUALCOMM

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. QUALCOMM paid out a comfortable 36% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 29% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that QUALCOMM's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see QUALCOMM has grown its earnings rapidly, up 21% a year for the past five years. QUALCOMM is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, QUALCOMM has increased its dividend at approximately 7.3% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is QUALCOMM an attractive dividend stock, or better left on the shelf? QUALCOMM has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. QUALCOMM looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Curious what other investors think of QUALCOMM? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.