Plato Income Maximiser (ASX:PL8) Is Paying Out A Dividend Of A$0.0055

The board of Plato Income Maximiser Limited (ASX:PL8) has announced that it will pay a dividend on the 30th of September, with investors receiving A$0.0055 per share. Based on this payment, the dividend yield on the company's stock will be 4.8%, which is an attractive boost to shareholder returns.

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Plato Income Maximiser's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment was quite easily covered by earnings, but it made up 125% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

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

Looking back, Plato Income Maximiser's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of A$0.054 in 2017 to the most recent total annual payment of A$0.066. This means that it has been growing its distributions at 2.5% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. 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. Plato Income Maximiser is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

In Summary

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 Plato Income Maximiser is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Plato Income Maximiser you should be aware of, and 1 of them is potentially serious. Is Plato Income Maximiser not quite the opportunity you were looking for? Why not check out 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.