M&G Credit Income Investment Trust's (LON:MGCI) Dividend Will Be Increased To £0.0243

M&G Credit Income Investment Trust plc (LON:MGCI) has announced that it will be increasing its dividend from last year's comparable payment on the 24th of February to £0.0243. This makes the dividend yield 4.1%, which is above the industry average.

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

M&G Credit Income Investment Trust Might Find It Hard To Continue The Dividend

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. M&G Credit Income Investment Trust isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. This makes us feel that the dividend will be hard to maintain.

Looking forward, earnings per share could 17.7% over the next year if the trend of the last few years can't be broken. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

M&G Credit Income Investment Trust's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. The annual payment during the last 3 years was £0.0209 in 2020, and the most recent fiscal year payment was £0.0404. This means that it has been growing its distributions at 25% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 18% over the last three years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

We're Not Big Fans Of M&G Credit Income Investment Trust's Dividend

In conclusion, we have some concerns about this dividend, even though it being raised is good. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, this doesn't get us very excited from an income standpoint.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for M&G Credit Income Investment Trust that investors should know about before committing capital to this stock. Is M&G Credit Income Investment Trust not quite the opportunity you were looking for? Why not check out 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.