Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that PBF Energy Inc. (NYSE:PBF) is about to go ex-dividend in just four 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase PBF Energy's shares on or after the 15th of August, you won't be eligible to receive the dividend, when it is paid on the 29th of August.

The company's next dividend payment will be US$0.25 per share, and in the last 12 months, the company paid a total of US$1.00 per share. Looking at the last 12 months of distributions, PBF Energy has a trailing yield of approximately 2.7% on its current stock price of US$37.16. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether PBF Energy has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for PBF Energy

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. PBF Energy paid out just 15% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 13% of its free cash flow in the last year.

It's positive to see that PBF Energy'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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see PBF Energy's earnings have been skyrocketing, up 43% per annum for the past five years. PBF Energy earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. PBF Energy has seen its dividend decline 1.8% per annum on average over the past 10 years, which is not great to see.

To Sum It Up

From a dividend perspective, should investors buy or avoid PBF Energy? It's great that PBF Energy is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about PBF Energy, and we would prioritise taking a closer look at it.

While it's tempting to invest in PBF Energy for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 3 warning signs for PBF Energy (1 is concerning!) that you ought to be aware of before buying the shares.

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

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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.