Power Solutions, Ltd. (TSE:4450) Passed Our Checks, And It's About To Pay A JP¥11.00 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Power Solutions, Ltd. (TSE:4450) is about to trade ex-dividend in the next four 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 Power Solutions' shares on or after the 27th of December will not receive the dividend, which will be paid on the 1st of January.

The upcoming dividend for Power Solutions will put a total of JP¥11.00 per share in shareholders' pockets. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Power Solutions can afford its dividend, and if the dividend could grow.

View our latest analysis for Power Solutions

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Power Solutions is paying out just 9.6% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

Click here to see how much of its profit Power Solutions paid out over the last 12 months.

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Power Solutions, with earnings per share up 4.0% on average over the last three years.

This is Power Solutions's first year of paying a regular dividend, so it doesn't have much of a history yet to compare to.

The Bottom Line

Should investors buy Power Solutions for the upcoming dividend? Power Solutions has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Power Solutions 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.

In light of that, while Power Solutions has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 3 warning signs for Power Solutions you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.