Plato Income Maximiser's (ASX:PL8) Dividend Will Be Increased To AU$0.0045

Plato Income Maximiser Limited's (ASX:PL8) dividend will be increasing on the 31st of August to AU$0.0045, with investors receiving 13% more than last year. This makes the dividend yield 3.9%, which is above the industry average.

See our latest analysis for Plato Income Maximiser

Plato Income Maximiser's Earnings Easily Cover the Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, the dividend made up 93% of cash flows, but a higher proportion of net income. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

Over the next year, EPS could expand by 49.1% if the company continues along the path it has been on recently. If recent patterns in the dividend continue, the payout ratio in 12 months could be 86% which is a bit high but can definitely be sustainable.

Plato Income Maximiser's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. The payments haven't really changed that much since 4 years ago. 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.

Dividend Growth Could Be Constrained

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Plato Income Maximiser has grown earnings per share at 49% per 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, this is probably not a great income stock, even though the dividend is being raised at the moment. 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. For example, we've picked out 1 warning sign for Plato Income Maximiser that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

When trading Plato Income Maximiser or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.