M&G Credit Income Investment Trust plc (LON:MGCI) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

M&G Credit Income Investment Trust plc (LON:MGCI) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Meaning, you will need to purchase M&G Credit Income Investment Trust's shares before the 31st of October to receive the dividend, which will be paid on the 22nd of November.

The company's next dividend payment will be UK£0.0214 per share, on the back of last year when the company paid a total of UK£0.08 to shareholders. Looking at the last 12 months of distributions, M&G Credit Income Investment Trust has a trailing yield of approximately 8.2% on its current stock price of UK£0.971. 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 M&G Credit Income Investment Trust can afford its dividend, and if the dividend could grow.

View our latest analysis for M&G Credit Income 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. Its dividend payout ratio is 82% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit M&G Credit Income Investment Trust paid out over the last 12 months.

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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see M&G Credit Income Investment Trust has grown its earnings rapidly, up 28% a year for the past five years.

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, five years ago, M&G Credit Income Investment Trust has lifted its dividend by approximately 31% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Should investors buy M&G Credit Income Investment Trust for the upcoming dividend? Earnings per share are growing nicely, and M&G Credit Income Investment Trust is paying out a percentage of its earnings that is around the average for dividend-paying stocks. M&G Credit Income Investment Trust ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 1 warning sign for M&G Credit Income Investment Trust and you should be aware of this before buying any shares.

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.