It looks like FORTEC Elektronik AG (ETR:FEV) is about to go ex-dividend in the next four 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase FORTEC Elektronik's shares before the 14th of February in order to be eligible for the dividend, which will be paid on the 18th of February.

The company's next dividend payment will be €0.85 per share, and in the last 12 months, the company paid a total of €0.85 per share. Calculating the last year's worth of payments shows that FORTEC Elektronik has a trailing yield of 5.6% on the current share price of €15.20. If you buy this business for its dividend, you should have an idea of whether FORTEC Elektronik's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for FORTEC Elektronik

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. FORTEC Elektronik paid out 105% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 21% of its cash flow last 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 FORTEC Elektronik fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. 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 FORTEC Elektronik paid out over the last 12 months.

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. FORTEC Elektronik's earnings per share have fallen at approximately 14% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.