Yahoo Finance We Wouldn't Be Too Quick To Buy Octopus Renewables Infrastructure Trust plc (LON:ORIT) Before It Goes Ex-Dividend
Octopus Renewables Infrastructure Trust plc (LON:ORIT) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Octopus Renewables Infrastructure Trust's shares on or after the 16th of May will not receive the dividend, which will be paid on the 31st of May.
The company's upcoming dividend is UK£0.015 a share, following on from the last 12 months, when the company distributed a total of UK£0.058 per share to shareholders. Based on the last year's worth of payments, Octopus Renewables Infrastructure Trust stock has a trailing yield of around 7.8% on the current share price of UK£0.745. If you buy this business for its dividend, you should have an idea of whether Octopus Renewables Infrastructure Trust's dividend is reliable and sustainable. So we need to investigate whether Octopus Renewables Infrastructure Trust can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Octopus Renewables Infrastructure Trust
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Octopus Renewables Infrastructure Trust paid out a disturbingly high 258% of its profit as dividends last year, which makes us concerned there's something we don't fully understand in the business.
Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're not enthused to see that Octopus Renewables Infrastructure Trust's earnings per share have remained effectively flat over the past three years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Octopus Renewables Infrastructure Trust has delivered an average of 8.1% per year annual increase in its dividend, based on the past four years of dividend payments.
The Bottom Line
Has Octopus Renewables Infrastructure Trust got what it takes to maintain its dividend payments? While we're glad to see that its earnings aren't shrinking, we're not enamored of the fact that it's paying out 258% of last year's earnings. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.
With that being said, if you're still considering Octopus Renewables Infrastructure Trust as an investment, you'll find it beneficial to know what risks this stock is facing. We've identified 2 warning signs with Octopus Renewables Infrastructure Trust (at least 1 which shouldn't be ignored), and understanding them should be part of your investment process.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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.
