It looks like Plato Income Maximiser Limited (ASX:PL8) is about to go ex-dividend in the next three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Plato Income Maximiser's shares on or after the 15th of June, you won't be eligible to receive the dividend, when it is paid on the 30th of June.

The company's next dividend payment will be AU$0.0055 per share, on the back of last year when the company paid a total of AU$0.06 to shareholders. Last year's total dividend payments show that Plato Income Maximiser has a trailing yield of 5.4% on the current share price of A$1.215. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Plato Income Maximiser has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Plato Income Maximiser

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Plato Income Maximiser paid out a comfortable 45% of its profit last year.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit Plato Income Maximiser paid out over the last 12 months. historic-dividend

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Plato Income Maximiser's earnings have been skyrocketing, up 74% per annum for the past five years.



We'd also point out that Plato Income Maximiser issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last five years, Plato Income Maximiser has lifted its dividend by approximately 4.1% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Plato Income Maximiser is keeping back more of its profits to grow the business.

Final Takeaway

Is Plato Income Maximiser worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. In summary, Plato Income Maximiser appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

On that note, you'll want to research what risks Plato Income Maximiser is facing. To help with this, we've discovered 3 warning signs for Plato Income Maximiser (1 shouldn't be ignored!) that you ought to be aware of before buying the shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.