Plato Income Maximiser (ASX:PL8) Has Affirmed Its Dividend Of AU$0.004

Plato Income Maximiser Limited (ASX:PL8) will pay a dividend of AU$0.004 on the 30th of June. Based on this payment, the dividend yield on the company's stock will be 4.0%, which is an attractive boost to shareholder returns.

View our latest analysis for Plato Income Maximiser

Plato Income Maximiser's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 119% of what it was earning and 93% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

EPS is set to grow by 49.1% over the next year if recent trends continue. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 75%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Plato Income Maximiser's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. Since 2017, the first annual payment was AU$0.054, compared to the most recent full-year payment of AU$0.048. Doing the maths, this is a decline of about 2.9% per year. A company that decreases its dividend over time generally isn't what we are looking for.

Plato Income Maximiser Might Find It Hard To Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see Plato Income Maximiser has been growing its earnings per share at 49% a year over the past five years. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Plato Income Maximiser that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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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