Rights and Issues Investment Trust Public Limited Company's (LON:RIII) investors are due to receive a payment of £0.1175 per share on 25th of September. Including this payment, the dividend yield on the stock will be 2.0%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Rights and Issues Investment Trust

Rights and Issues Investment Trust Might Find It Hard To Continue The Dividend

Even a low dividend yield can be attractive if it is sustained for years on end. While Rights and Issues Investment Trust is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. This gives us some comfort about the level of the dividend payments.

Over the next year, EPS might fall by 3.9% based on recent performance. While this means that the company will be unprofitable, we generally believe cash flows are more important, and the current cash payout ratio is quite healthy, which gives us comfort. historic-dividend

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of £0.268 in 2013 to the most recent total annual payment of £0.40. This means that it has been growing its distributions at 4.1% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Rights and Issues Investment Trust has seen earnings per share falling at 3.9% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.



Rights and Issues Investment Trust's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Rights and Issues Investment Trust is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Rights and Issues Investment Trust that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of 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.