Rattler Midstream LP (NASDAQ:RTLR) stock is about to trade ex-dividend in 2 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Rattler Midstream's shares before the 13th of August in order to receive the dividend, which the company will pay on the 23rd of August.

The company's next dividend payment will be US$0.25 per share, and in the last 12 months, the company paid a total of US$0.80 per share. Based on the last year's worth of payments, Rattler Midstream stock has a trailing yield of around 7.3% on the current share price of $10.97. If you buy this business for its dividend, you should have an idea of whether Rattler Midstream's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Rattler Midstream

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year, Rattler Midstream paid out 102% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. 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. The company paid out 94% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want look more closely here.

Cash is slightly more important than profit from a dividend perspective, but given Rattler Midstream's payments were not well covered by either earnings or cash flow, we are concerned about the sustainability of this dividend.

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's vaguely disappointing to see earnings per share declined -3.2% on last year.