Plato Income Maximiser Limited's (ASX:PL8) investors are due to receive a payment of AU$0.0055 per share on 30th of June. This makes the dividend yield 5.5%, which will augment investor returns quite nicely.

View our latest analysis for Plato Income Maximiser

Plato Income Maximiser's Earnings Easily Cover the Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last dividend, Plato Income Maximiser is earning enough to cover the payment, but the it makes up 147% 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.

Over the next year, EPS could expand by 74.1% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 40% by next year, which is in a pretty sustainable range. historic-dividend

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. This suggests that the dividend might not be the most reliable. Since 2017, the dividend has gone from AU$0.054 to AU$0.066. This means that it has been growing its distributions at 4.1% 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

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 74% 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.



We'd also point out that Plato Income Maximiser has issued stock equal to 29% 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.

Our Thoughts On Plato Income Maximiser's Dividend

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. To that end, Plato Income Maximiser has 3 warning signs (and 1 which doesn't sit too well with us) 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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