Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Plato Income Maximiser Limited (ASX:PL8) is about to go ex-dividend in just 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show 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 upcoming dividend is AU$0.004 a share, following on from the last 12 months, when the company distributed a total of AU$0.048 per share to shareholders. Looking at the last 12 months of distributions, Plato Income Maximiser has a trailing yield of approximately 3.9% on its current stock price of A$1.22. If you buy this business for its dividend, you should have an idea of whether Plato Income Maximiser's dividend is reliable and sustainable. 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.

View 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 distributed an unsustainably high 119% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious.

When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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 49% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Plato Income Maximiser's dividend payments per share have declined at 2.9% per year on average over the past four years, which is uninspiring. Plato Income Maximiser is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

The Bottom Line

Is Plato Income Maximiser an attractive dividend stock, or better left on the shelf? We're not enthused to see Plato Income Maximiser's dividend was not well covered by earnings over the last year, although it is great to see earnings growing. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.

If you want to look further into Plato Income Maximiser, it's worth knowing the risks this business faces. For example - Plato Income Maximiser has 1 warning sign we think you should be aware of.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

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