Don't Buy The Independent Investment Trust PLC (LON:IIT) For Its Next Dividend Without Doing These Checks

The Independent Investment Trust PLC (LON:IIT) is about to trade ex-dividend in the next four days. You can purchase shares before the 18th of February in order to receive the dividend, which the company will pay on the 9th of April.

Independent Investment Trust's next dividend payment will be UK£0.05 per share, and in the last 12 months, the company paid a total of UK£0.08 per share. Looking at the last 12 months of distributions, Independent Investment Trust has a trailing yield of approximately 1.5% on its current stock price of £5.4. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Independent Investment Trust can afford its dividend, and if the dividend could grow.

See our latest analysis for Independent Investment 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. Independent Investment Trust's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover.

Click here to see how much of its profit Independent Investment Trust paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Independent Investment Trust was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Independent Investment Trust has increased its dividend at approximately 4.8% a year on average.

Remember, you can always get a snapshot of Independent Investment Trust's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

Has Independent Investment Trust got what it takes to maintain its dividend payments? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Worse, the general trend in its earnings looks negative in recent years. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

Although, if you're still interested in Independent Investment Trust and want to know more, you'll find it very useful to know what risks this stock faces. For example - Independent Investment Trust has 2 warning signs we think you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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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