Yahoo Finance Here's Why We're Wary Of Buying Schroder BSC Social Impact Trust's (LON:SBSI) For Its Upcoming Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Schroder BSC Social Impact Trust plc (LON:SBSI) is about to go ex-dividend in just three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Schroder BSC Social Impact Trust's shares before the 9th of November in order to receive the dividend, which the company will pay on the 20th of December.
The upcoming dividend for Schroder BSC Social Impact Trust is UK£0.023 per share, increased from last year's total dividends per share of UK£0.013. If you buy this business for its dividend, you should have an idea of whether Schroder BSC Social Impact Trust's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Schroder BSC Social Impact Trust
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. It paid out 82% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. From this perspective, we're disturbed to see earnings per share plunged 21% over the last 12 months, and we'd wonder if the company has had some kind of major event that has skewed the calculation.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, two years ago, Schroder BSC Social Impact Trust has lifted its dividend by approximately 11% a year on average. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Schroder BSC Social Impact Trust is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.
Final Takeaway
Has Schroder BSC Social Impact Trust got what it takes to maintain its dividend payments? We're not overly enthused to see Schroder BSC Social Impact Trust's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.
With that being said, if you're still considering Schroder BSC Social Impact Trust as an investment, you'll find it beneficial to know what risks this stock is facing. We've identified 4 warning signs with Schroder BSC Social Impact Trust (at least 1 which can't be ignored), and understanding these should be part of your investment process.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
