While the last five years haven't been excellent for Staples (NASDAQ:SPLS), the office supplies retailer has continued to increase its dividend. The company now sports a 3.74% payout, which is up from below 1% a half-decade ago, due in large part to Staples' falling share price. That's unquestionably a mixed bag for investors, who look for consistent payouts and solid businesses.

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Taking a deeper look into Staples, it's clear the business is not a top dividend stock. A series of problems makes Staples too shaky to rely on, and future payouts could be in jeopardy. Here are the three main issues with this retailer.

Staples' free cash flow concerns
In its last fiscal year, Staples generated free cash flow of $737 million. Unfortunately, it also splashed out $653 million -- 89% of its free cash -- in dividends and share repurchases. That trend has continued in this fiscal year: Through the first half, Staples generated $194 million in free cash flow and spent $264 million on dividends and stock buybacks.

On the slightly brighter side, Staples has kept its dividend solid for the last year. While it had been on the slow increase plan, the company has been issuing a quarterly payment of $0.12 since the beginning of 2013. Those overpayments have cut into the company's cash on hand position. Staples is now down to $417 million in cash and equivalents -- this time last year it had $1.2 billion.

Staples needs to up its game
Total revenue fell 5% last year as Staples continues efforts to reinvent its brand. The process has dragged on, with sales down 2% during the first six months of 2014.

Management has laid out a seven-step plan to revitalizing the company, and said during its March earnings conference call. that the company "achieved six of [its] seven goals" last year. However, the company failed to grow sales or even set sales up for growth in the first half of 2014.

The biggest shortfall -- the one unachieved goal from 2013 -- has been in growing sales at its physical locations. Comparable sales fell in the last quarter, which basically dictated a fall in overall sales. Without growing the top of its cash funnel -- the part where cash comes into the business -- Staples will have a hard time growing its total cash reserve and sustaining its dividend payout pace.

Staples needs to cut back on its dividend payments
The biggest problem for Staples as a dividend payer is that it should probably dial back some payouts and stock repurchases in order to invest in itself. The goal of a dividend is to give investors money that the company doesn't need or couldn't invest as well as its investors could. Staples needs its cash, though.

The company's seven goals require investment, and that means leaving more cash available. Goals such as expanding in Europe, growing the commercial business, and expanding product lines don't come for free -- or even cheap. Instead of buying back shares at about $14.85 -- the stock now trades at $12.85 -- Staples needs to focus on its own house, knowing that in the long run, that's going to be better for investors.

With so many problems ahead and such immense pressure on its cash, Staples just doesn't have what it takes to be a top dividend stock. That's not to say better times aren't ahead, but the company doesn't have what investors should be looking for in a dividend stock.

Andrew Marder has no position in any stocks mentioned. The Motley Fool owns shares of Staples. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.