Readers hoping to buy Rights and Issues Investment Trust Public Limited Company (LON:RIII) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Rights and Issues Investment Trust's shares on or after the 25th of August will not receive the dividend, which will be paid on the 26th of September.

The company's next dividend payment will be UK£0.11 per share. Last year, in total, the company distributed UK£0.35 to shareholders. Based on the last year's worth of payments, Rights and Issues Investment Trust has a trailing yield of 1.6% on the current stock price of £21.45. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Rights and Issues Investment Trust can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Rights and Issues Investment Trust

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Rights and Issues Investment Trust paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run.

Click here to see how much of its profit Rights and Issues Investment Trust paid out over the last 12 months. historic-dividend

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Rights and Issues Investment Trust was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.



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, 10 years ago, Rights and Issues Investment Trust has lifted its dividend by approximately 3.1% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

We update our analysis on Rights and Issues Investment Trust every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Is Rights and Issues Investment Trust worth buying for its dividend? We're a bit uncomfortable with it paying a dividend while being loss-making. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

With that in mind though, if the poor dividend characteristics of Rights and Issues Investment Trust don't faze you, it's worth being mindful of the risks involved with this business. Case in point: We've spotted 2 warning signs for Rights and Issues Investment Trust you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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