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 Capital One Financial Corporation (NYSE:COF) is about to go ex-dividend in just four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Capital One Financial's shares before the 12th of August in order to be eligible for the dividend, which will be paid on the 23rd of August.

The company's upcoming dividend is US$0.60 a share, following on from the last 12 months, when the company distributed a total of US$2.40 per share to shareholders. Last year's total dividend payments show that Capital One Financial has a trailing yield of 1.8% on the current share price of US$133.69. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Capital One Financial is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see Capital One Financial's earnings per share have been shrinking at 2.2% a year over the previous five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Capital One Financial has lifted its dividend by approximately 7.2% a year on average.

To Sum It Up

Should investors buy Capital One Financial for the upcoming dividend? Capital One Financial's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. It doesn't appear an outstanding opportunity, but could be worth a closer look.

With that being said, if dividends aren't your biggest concern with Capital One Financial, you should know about the other risks facing this business. Case in point: We've spotted 2 warning signs for Capital One Financial you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.

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