Cenovus Energy Inc. (TSE:CVE) stock is about to trade ex-dividend in 4 days. The ex-dividend date is two business days before a company's record date in most cases, 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. Meaning, you will need to purchase Cenovus Energy's shares before the 14th of March to receive the dividend, which will be paid on the 31st of March.

The company's upcoming dividend is CA$0.18 a share, following on from the last 12 months, when the company distributed a total of CA$0.85 per share to shareholders. Based on the last year's worth of payments, Cenovus Energy stock has a trailing yield of around 4.7% on the current share price of CA$18.31. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Cenovus Energy can afford its dividend, and if the dividend could grow.

View our latest analysis for Cenovus Energy

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. That's why it's good to see Cenovus Energy paying out a modest 49% of its earnings. 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. Thankfully its dividend payments took up just 37% of the free cash flow it generated, which is a comfortable payout ratio.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Cenovus Energy'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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Cenovus Energy has seen its dividend decline 2.2% per annum on average over the past 10 years, which is not great to see.

Final Takeaway

Is Cenovus Energy an attractive dividend stock, or better left on the shelf? While it's not great to see that earnings per share are effectively flat over the 10-year period we checked, at least the payout ratios are low and conservative. In summary, it's hard to get excited about Cenovus Energy from a dividend perspective.

On that note, you'll want to research what risks Cenovus Energy is facing. For example - Cenovus Energy has 1 warning sign we think you should be aware of.

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.