Readers hoping to buy Quad/Graphics, Inc. (NYSE:QUAD) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. This means that investors who purchase Quad/Graphics' shares on or after the 19th of August will not receive the dividend, which will be paid on the 6th of September.

The company's upcoming dividend is US$0.05 a share, following on from the last 12 months, when the company distributed a total of US$0.20 per share to shareholders. Looking at the last 12 months of distributions, Quad/Graphics has a trailing yield of approximately 4.5% on its current stock price of US$4.47. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Quad/Graphics

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Quad/Graphics paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It paid out 12% of its free cash flow as dividends last year, which is conservatively low.

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 fall far enough, the company could be forced to cut its dividend. Quad/Graphics was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Quad/Graphics's dividend payments per share have declined at 16% per year on average over the past 10 years, which is uninspiring.

Get our latest analysis on Quad/Graphics's balance sheet health here.

Final Takeaway

From a dividend perspective, should investors buy or avoid Quad/Graphics? It's hard to get used to Quad/Graphics paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. To summarise, Quad/Graphics looks okay on this analysis, although it doesn't appear a stand-out opportunity.

So if you want to do more digging on Quad/Graphics, you'll find it worthwhile knowing the risks that this stock faces. For example, we've found 1 warning sign for Quad/Graphics that we recommend you consider before investing in the business.

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.