Do These 3 Checks Before Buying London Stock Exchange Group plc (LON:LSEG) For Its Upcoming Dividend

London Stock Exchange Group plc (LON:LSEG) 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase London Stock Exchange Group's shares on or after the 17th of August, you won't be eligible to receive the dividend, when it is paid on the 20th of September.

The company's next dividend payment will be UK£0.36 per share, on the back of last year when the company paid a total of UK£1.11 to shareholders. Based on the last year's worth of payments, London Stock Exchange Group stock has a trailing yield of around 1.3% on the current share price of £82.7. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether London Stock Exchange Group has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for London Stock Exchange Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. London Stock Exchange Group paid out 92% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances.

When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. So we're not too excited that London Stock Exchange Group's earnings are down 4.6% a year over the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. London Stock Exchange Group has delivered an average of 14% per year annual increase in its dividend, based on the past 10 years of dividend payments. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. London Stock Exchange Group is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.

To Sum It Up

Has London Stock Exchange Group got what it takes to maintain its dividend payments? Earnings per share are in decline and London Stock Exchange Group is paying out what we feel is an uncomfortably high percentage of its profit as dividends. It's not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

So if you're still interested in London Stock Exchange Group despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Our analysis shows 2 warning signs for London Stock Exchange Group and you should be aware of these before buying any shares.

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.