Read This Before Considering Plato Income Maximiser Limited (ASX:PL8) For Its Upcoming AU$0.004 Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Plato Income Maximiser Limited (ASX:PL8) is about to trade ex-dividend in the next four days. Investors can purchase shares before the 14th of May in order to be eligible for this dividend, which will be paid on the 31st of May.
Plato Income Maximiser's next dividend payment will be AU$0.004 per share. Last year, in total, the company distributed AU$0.048 to shareholders. Last year's total dividend payments show that Plato Income Maximiser has a trailing yield of 4.0% on the current share price of A$1.19. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Plato Income Maximiser can afford its dividend, and if the dividend could grow.
View our latest analysis for Plato Income Maximiser
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Plato Income Maximiser distributed an unsustainably high 119% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut.
Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.
Click here to see how much of its profit Plato Income Maximiser paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Plato Income Maximiser has grown its earnings rapidly, up 49% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Plato Income Maximiser has seen its dividend decline 2.9% per annum on average over the past four years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
Final Takeaway
From a dividend perspective, should investors buy or avoid Plato Income Maximiser? We're not enthused to see Plato Income Maximiser's dividend was not well covered by earnings over the last year, although it is great to see earnings growing. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.
However if you're still interested in Plato Income Maximiser as a potential investment, you should definitely consider some of the risks involved with Plato Income Maximiser. For example - Plato Income Maximiser has 1 warning sign we think you should be aware of.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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.
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