Sinclair, Inc. (NASDAQ:SBGI) stock is about to trade ex-dividend in 2 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 as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Sinclair's shares on or after the 3rd of June, you won't be eligible to receive the dividend, when it is paid on the 17th of June.

The company's next dividend payment will be US$0.25 per share, on the back of last year when the company paid a total of US$1.00 to shareholders. Calculating the last year's worth of payments shows that Sinclair has a trailing yield of 7.9% on the current share price of US$12.67. If you buy this business for its dividend, you should have an idea of whether Sinclair's dividend is reliable and sustainable. As a result, readers should always check whether Sinclair has been able to grow its dividends, or if the dividend might be cut.

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. Sinclair reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Sinclair didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Over the last year, it paid out more than three-quarters (83%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

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 earnings fall far enough, the company could be forced to cut its dividend. Sinclair reported a loss last year, but at least the general trend suggests its income has 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Sinclair has increased its dividend at approximately 5.2% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Sinclair is keeping back more of its profits to grow the business.

Remember, you can always get a snapshot of Sinclair's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

Is Sinclair an attractive dividend stock, or better left on the shelf? It's hard to get used to Sinclair paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. In summary, it's hard to get excited about Sinclair from a dividend perspective.

So if you want to do more digging on Sinclair, you'll find it worthwhile knowing the risks that this stock faces. For instance, we've identified 5 warning signs for Sinclair (1 makes us a bit uncomfortable) you should be aware of.

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.