M&G Credit Income Investment Trust plc (LON:MGCI) Pays A UK£0.0196 Dividend In Just Three Days

M&G Credit Income Investment Trust plc (LON:MGCI) stock is about to trade ex-dividend in 3 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase M&G Credit Income Investment Trust's shares on or after the 1st of May, you won't be eligible to receive the dividend, when it is paid on the 27th of May.

The company's next dividend payment will be UK£0.0196 per share, and in the last 12 months, the company paid a total of UK£0.085 per share. Calculating the last year's worth of payments shows that M&G Credit Income Investment Trust has a trailing yield of 8.8% on the current share price of UK£0.964. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

We've discovered 1 warning sign about M&G Credit Income Investment Trust. View them for free.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. M&G Credit Income Investment Trust paid out 114% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance.

When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.

View our latest analysis for M&G Credit Income Investment Trust

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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see M&G Credit Income Investment Trust's earnings per share have risen 12% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, six years ago, M&G Credit Income Investment Trust has lifted its dividend by approximately 26% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is M&G Credit Income Investment Trust worth buying for its dividend? M&G Credit Income Investment Trust has been generating credible earnings per share growth, although its dividend payments were not adequately covered by earnings. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.

However if you're still interested in M&G Credit Income Investment Trust as a potential investment, you should definitely consider some of the risks involved with M&G Credit Income Investment Trust. Case in point: We've spotted 1 warning sign for M&G Credit Income 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.

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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.