Be Sure To Check Out Prime Strategy Co., Ltd. (TSE:5250) Before It Goes Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Prime Strategy Co., Ltd. (TSE:5250) is about to trade ex-dividend in the next three 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 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. In other words, investors can purchase Prime Strategy's shares before the 28th of November in order to be eligible for the dividend, which will be paid on the 28th of February.

The company's next dividend payment will be JP¥21.00 per share, on the back of last year when the company paid a total of JP¥20.00 to shareholders. Calculating the last year's worth of payments shows that Prime Strategy has a trailing yield of 1.9% on the current share price of JP¥1073.00. If you buy this business for its dividend, you should have an idea of whether Prime Strategy's dividend is reliable and sustainable. So we need to investigate whether Prime Strategy can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Prime Strategy

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. Prime Strategy paid out a comfortable 44% of its profit last year.

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

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Prime Strategy's earnings have been skyrocketing, up 36% per annum 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. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Given that Prime Strategy has only been paying a dividend for a year, there's not much of a past history to draw insight from.

The Bottom Line

From a dividend perspective, should investors buy or avoid Prime Strategy? 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 is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. We think this is a pretty attractive combination, and would be interested in investigating Prime Strategy more closely.

On that note, you'll want to research what risks Prime Strategy is facing. For example, we've found 2 warning signs for Prime Strategy that we recommend you consider before investing in the business.

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.