Myers Industries, Inc. (NYSE:MYE) stock is about to trade ex-dividend in three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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 Myers Industries' shares before the 3rd of December to receive the dividend, which will be paid on the 3rd of January.

The company's next dividend payment will be US$0.135 per share, and in the last 12 months, the company paid a total of US$0.54 per share. Calculating the last year's worth of payments shows that Myers Industries has a trailing yield of 4.7% on the current share price of US$11.45. If you buy this business for its dividend, you should have an idea of whether Myers Industries's dividend is reliable and sustainable. So we need to investigate whether Myers Industries can afford its dividend, and if the dividend could grow.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Myers Industries paid out 130% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance. 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. Fortunately, it paid out only 44% of its free cash flow in the past year.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Myers Industries fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

Click here to see how much of its profit Myers Industries paid out over the last 12 months.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Myers Industries earnings per share are up 7.3% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Myers Industries's dividend payments are broadly unchanged compared to where they were 10 years ago.

To Sum It Up

Is Myers Industries an attractive dividend stock, or better left on the shelf? Myers Industries has been steadily growing its earnings per share, and it is paying out just 44% of its cash flow but an uncomfortably high 130% of its income. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

However if you're still interested in Myers Industries as a potential investment, you should definitely consider some of the risks involved with Myers Industries. Be aware that Myers Industries is showing 4 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...

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.