How does one define the perfect retirement stock? Well, it would have to offer a substantial upfront dividend yield, preferably with full franking credits attached, to help fund said retirement, for one. It would also preferably have a decent track record of funding reliable dividends, to lend one confidence that the stock can conceivably continue to underpin a retirement for years, or even decades.
A diversified earnings base would also help, as would payouts on a more frequent interval than the six-month gap that is common on the ASX.
Plato Income Maximiser Ltd (ASX: PL8) arguably ticks all of these boxes. Let's go through them.
Plato Income Maximiser is a listed investment company (LIC) that specialises in catering to the financial needs of retirees. Like most LICs, Plato runs its own underlying investment portfolio that it manages on behalf of its investors. In Plato's case, this portfolio consists of a wide variety of other ASX dividend-paying shares.
These shares are all selected on their ability to fund large but sustainable dividends. Some of these holdings currently include BHP Group Ltd (ASX: BHP), National Australia Bank Ltd (ASX: NAB), Woodside Energy Group Ltd (ASX: WDS) and Telstra Group Ltd (ASX: TLS). So that's diversity ticked off.
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How does this ASX retirement stock measure up?
Plato uses the dividends it receives from this underlying portfolio to pay out its own dividends. This dividend comes every single month, meaning investors enjoy 12 paycheques a year from this retirement stock. Those dividends usually come with full franking credits attached too. Tick, tick.
Over the past 12 months, Plato has funded 12 dividends, each worth 0.55 cents per share. The annual total of 6.6 cents per share in fully franked dividends gives this retirement stock a trailing dividend yield of 4.44%. That's at yesterday's closing share price of $1.48. Another box ticked. Bear in mind that this yield comes after Plato's 18.8% rise over the past 12 months, which has reduced the trailing dividend yield on his company substantially.
But what about Plato's track record?
Well, since launching in 2017, Plato has only cut its dividend once. That was over 2020, when the pandemic crushed the dividends many ASX shares were able to pay out. Plato did cut its monthly dividend from the then-0.5 cents per share per month down to 0.4 cents per share. But that lasted about a year, and investors have seen their payouts rise back and then exceed 2020's levels since.
In terms of overall returns, Plato investors have enjoyed an average total return (share price growth plus dividends) of 10.2% per annum since inception. That just beats out the broader market, which has averaged 10% per annum over the same period.
Our final box gets a tick, and as such, I would be happy to recommend Plato Income Maximiser to any income investor looking for the perfect retirement stock today.
