Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Benchmark Electronics, Inc. (NYSE:BHE) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is one business day before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Benchmark Electronics' shares before the 31st of March in order to receive the dividend, which the company will pay on the 11th of April.

The company's next dividend payment will be US$0.17 per share, and in the last 12 months, the company paid a total of US$0.68 per share. Last year's total dividend payments show that Benchmark Electronics has a trailing yield of 1.7% on the current share price of US$39.84. If you buy this business for its dividend, you should have an idea of whether Benchmark Electronics's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

The end of cancer? These 15 emerging AI stocks are developing tech that will allow early identification of life changing diseases like cancer and Alzheimer's.

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. Fortunately Benchmark Electronics's payout ratio is modest, at just 38% of profit. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 15% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Check out our latest analysis for Benchmark Electronics

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Benchmark Electronics has grown its earnings rapidly, up 24% a year for the past five years. Benchmark Electronics 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Benchmark Electronics has delivered an average of 1.8% per year annual increase in its dividend, based on the past seven years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Benchmark Electronics is keeping back more of its profits to grow the business.

The Bottom Line

Is Benchmark Electronics an attractive dividend stock, or better left on the shelf? Benchmark Electronics 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. There's a lot to like about Benchmark Electronics, and we would prioritise taking a closer look at it.

Ever wonder what the future holds for Benchmark Electronics? See what the three analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.