Readers hoping to buy Northern Technologies International Corporation (NASDAQ:NTIC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase Northern Technologies International's shares before the 31st of October to receive the dividend, which will be paid on the 15th of November.

The company's next dividend payment will be US$0.07 per share, and in the last 12 months, the company paid a total of US$0.28 per share. Looking at the last 12 months of distributions, Northern Technologies International has a trailing yield of approximately 2.3% on its current stock price of $12.2. If you buy this business for its dividend, you should have an idea of whether Northern Technologies International's dividend is reliable and sustainable. As a result, readers should always check whether Northern Technologies International has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Northern Technologies International

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. Northern Technologies International paid out 73% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Northern Technologies International paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

Click here to see how much of its profit Northern Technologies International paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Northern Technologies International's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Northern Technologies International has delivered 5.8% dividend growth per year on average over the past six years.

To Sum It Up

Is Northern Technologies International an attractive dividend stock, or better left on the shelf? In addition to earnings being flat, Northern Technologies International is paying out a reasonable percentage of its earnings as profits. However, the dividend was not well covered by free cash flow. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Northern Technologies International. Case in point: We've spotted 2 warning signs for Northern Technologies International you should be aware of.

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.