It looks like Rattler Midstream LP (NASDAQ:RTLR) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Accordingly, Rattler Midstream investors that purchase the stock on or after the 12th of May will not receive the dividend, which will be paid on the 20th of May.

The company's next dividend payment will be US$0.30 per share, on the back of last year when the company paid a total of US$1.00 to shareholders. Last year's total dividend payments show that Rattler Midstream has a trailing yield of 7.3% on the current share price of $13.61. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out 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. Its dividend payout ratio is 86% 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. It could become a concern if earnings started to decline. A useful secondary check can be to evaluate whether Rattler Midstream generated enough free cash flow to afford its dividend. Over the last year, it paid out dividends equivalent to 315% of what it generated in free cash flow, a disturbingly high percentage. It's pretty hard to pay out more than you earn, so we wonder how Rattler Midstream intends to continue funding this dividend, or if it could be forced to cut the payment.

Rattler Midstream paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Rattler Midstream to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Rattler Midstream's earnings per share have plummeted approximately 47% a year over the previous five years.