The board of Rights and Issues Investment Trust Public Limited Company (LON:RIII) has announced that it will pay a dividend on the 26th of September, with investors receiving £0.1075 per share. Including this payment, the dividend yield on the stock will be 1.6%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Rights and Issues Investment Trust

Rights and Issues Investment Trust's Distributions May Be Difficult To Sustain

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Even in the absence of profits, Rights and Issues Investment Trust is paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Looking forward, earnings per share could rise by 3.5% over the next year if the trend from the last few years continues. This is the right direction to be moving, but it is probably not enough to achieve profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later. historic-dividend

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the dividend has gone from £0.255 total annually to £0.348. This means that it has been growing its distributions at 3.1% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Rights and Issues Investment Trust May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings has been rising at 3.5% per annum over the last five years, which admittedly is a bit slow. With EPS growth hard to come by and the company not turning a profit, we wouldn't be particularly optimistic about the growth prospects for Rights and Issues Investment Trust's dividend in the future.



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

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Rights and Issues Investment Trust's payments, as there could be some issues with sustaining them into the future. The track record isn't great, and the payments are a bit high to be considered sustainable. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Rights and Issues Investment Trust that you should be aware of before investing. 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.

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