Readers hoping to buy DFI Retail Group Holdings Limited (SGX:D01) 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. Meaning, you will need to purchase DFI Retail Group Holdings' shares before the 22nd of August to receive the dividend, which will be paid on the 16th of October.

The company's next dividend payment will be US$0.035 per share, on the back of last year when the company paid a total of US$0.085 to shareholders. Based on the last year's worth of payments, DFI Retail Group Holdings stock has a trailing yield of around 4.5% on the current share price of US$1.90. 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.

Check out our latest analysis for DFI Retail Group Holdings

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Last year, DFI Retail Group Holdings paid out 96% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. A useful secondary check can be to evaluate whether DFI Retail Group Holdings generated enough free cash flow to afford its dividend. Luckily it paid out just 13% of its free cash flow last year.

It's good to see that while DFI Retail Group Holdings's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

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. With that in mind, we're encouraged by the steady growth at DFI Retail Group Holdings, with earnings per share up 7.0% on average over the last five years.