Dividend Investors: Don't Be Too Quick To Buy Tribeca Global Natural Resources Limited (ASX:TGF) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Tribeca Global Natural Resources Limited (ASX:TGF) is about to trade ex-dividend in the next two days. Typically, the ex-dividend date is two business days 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 at least 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 Tribeca Global Natural Resources' shares on or after the 2nd of September, you won't be eligible to receive the dividend, when it is paid on the 3rd of October.

The company's next dividend payment will be AU$0.05 per share, and in the last 12 months, the company paid a total of AU$0.05 per share. Based on the last year's worth of payments, Tribeca Global Natural Resources stock has a trailing yield of around 3.1% on the current share price of AU$1.59. If you buy this business for its dividend, you should have an idea of whether Tribeca Global Natural Resources's dividend is reliable and sustainable. So we need to investigate whether Tribeca Global Natural Resources can afford its dividend, and if the dividend could grow.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Its dividend payout ratio is 79% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

View our latest analysis for Tribeca Global Natural Resources

Click here to see how much of its profit Tribeca Global Natural Resources paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Tribeca Global Natural Resources's earnings per share have dropped 7.8% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

We'd also point out that Tribeca Global Natural Resources issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Tribeca Global Natural Resources's dividend payments per share have declined at 21% per year on average over the past three years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

To Sum It Up

Is Tribeca Global Natural Resources an attractive dividend stock, or better left on the shelf? We're not overly enthused to see Tribeca Global Natural Resources's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. Tribeca Global Natural Resources doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

With that in mind though, if the poor dividend characteristics of Tribeca Global Natural Resources don't faze you, it's worth being mindful of the risks involved with this business. Case in point: We've spotted 2 warning signs for Tribeca Global Natural Resources 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.