Plato Income Maximiser (ASX:PL8) Has Announced A Dividend Of A$0.0055

Plato Income Maximiser Limited (ASX:PL8) will pay a dividend of A$0.0055 on the 31st of December. This means the dividend yield will be fairly typical at 4.6%.

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Plato Income Maximiser's Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Plato Income Maximiser's dividend was only 59% of earnings, however it was paying out 125% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share could rise by 20.7% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 51% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Plato Income Maximiser

Plato Income Maximiser's Dividend Has Lacked Consistency

It's comforting to see that Plato Income Maximiser has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the annual payment back then was A$0.054, compared to the most recent full-year payment of A$0.066. This works out to be a compound annual growth rate (CAGR) of approximately 2.5% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Plato Income Maximiser has been growing its earnings per share at 21% a year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Plato Income Maximiser could prove to be a strong dividend payer.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Plato Income Maximiser is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Plato Income Maximiser (1 is concerning!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.