It looks like Plato Income Maximiser Limited (ASX:PL8) is about to go ex-dividend in the next 4 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 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. This means that investors who purchase Plato Income Maximiser's shares on or after the 16th of May will not receive the dividend, which will be paid on the 31st of May.

The company's next dividend payment will be AU$0.011 per share. Last year, in total, the company distributed AU$0.06 to shareholders. Based on the last year's worth of payments, Plato Income Maximiser stock has a trailing yield of around 5.2% on the current share price of A$1.26. If you buy this business for its dividend, you should have an idea of whether Plato Income Maximiser's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Plato Income Maximiser

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Plato Income Maximiser's payout ratio is modest, at just 45% of profit.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. 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.



Plato Income Maximiser also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Plato Income Maximiser has delivered an average of 4.1% per year annual increase in its dividend, based on the past five years of dividend payments. 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.

To Sum It Up

Should investors buy Plato Income Maximiser for the upcoming dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Plato Income Maximiser ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For instance, we've identified 3 warning signs for Plato Income Maximiser (1 doesn't sit too well with us) you should be aware of.

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.