Plato Income Maximiser (ASX:PL8) Is Due To Pay A Dividend Of A$0.0055
The board of Plato Income Maximiser Limited (ASX:PL8) has announced that it will pay a dividend of A$0.0055 per share on the 30th of September. This means the annual payment is 5.4% of the current stock price, which is above the average for the industry.
View our latest analysis for Plato Income Maximiser
Plato Income Maximiser's Dividend Is Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last dividend, Plato Income Maximiser is earning enough to cover the payment, but then it makes up 123% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
If the company can't turn things around, EPS could fall by 5.4% over the next year. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 83%, meaning that most of the company's earnings is being paid out to shareholders.
Plato Income Maximiser's Dividend Has Lacked Consistency
Looking back, Plato Income Maximiser's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. 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 2.9% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
Dividend Growth Is Doubtful
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. In the last five years, Plato Income Maximiser's earnings per share has shrunk at approximately 5.4% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.
We should note that Plato Income Maximiser has issued stock equal to 18% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
Plato Income Maximiser's Dividend Doesn't Look Sustainable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Plato Income Maximiser's payments, as there could be some issues with sustaining them into the future. 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.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Plato Income Maximiser has 3 warning signs (and 1 which is concerning) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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