Why You Might Be Interested In Premium Water Holdings,Inc. (TSE:2588) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Premium Water Holdings,Inc. (TSE:2588) is about to trade ex-dividend in the next three days. The ex-dividend date is commonly two business days 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 can take two business days or more to settle. This means that investors who purchase Premium Water HoldingsInc's shares on or after the 28th of March will not receive the dividend, which will be paid on the 20th of June.

The company's next dividend payment will be JP¥50.00 per share, and in the last 12 months, the company paid a total of JP¥100.00 per share. Based on the last year's worth of payments, Premium Water HoldingsInc stock has a trailing yield of around 3.3% on the current share price of JP¥3015.00. 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 Premium Water HoldingsInc has been able to grow its dividends, or if the dividend might be cut.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Premium Water HoldingsInc's payout ratio is modest, at just 39% of profit. A useful secondary check can be to evaluate whether Premium Water HoldingsInc generated enough free cash flow to afford its dividend. It paid out 20% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Premium Water HoldingsInc's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

View our latest analysis for Premium Water HoldingsInc

Click here to see how much of its profit Premium Water HoldingsInc 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Premium Water HoldingsInc has grown its earnings rapidly, up 68% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Premium Water HoldingsInc has delivered an average of 115% per year annual increase in its dividend, based on the past three years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Has Premium Water HoldingsInc got what it takes to maintain its dividend payments? We love that Premium Water HoldingsInc is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about Premium Water HoldingsInc, and we would prioritise taking a closer look at it.

While it's tempting to invest in Premium Water HoldingsInc for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for Premium Water HoldingsInc that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.