Octopus Renewables Infrastructure Trust (LON:ORIT) Has Affirmed Its Dividend Of £0.015

The board of Octopus Renewables Infrastructure Trust plc (LON:ORIT) has announced that it will pay a dividend on the 31st of May, with investors receiving £0.015 per share. The dividend yield will be 7.7% based on this payment which is still above the industry average.

View our latest analysis for Octopus Renewables Infrastructure Trust

Octopus Renewables Infrastructure Trust Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was higher than its profits, and made up 92% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

Over the next year, EPS could expand by 0.4% if the company continues along the path it has been on recently. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 270% over the next year.

Octopus Renewables Infrastructure Trust Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2020, the dividend has gone from £0.0424 total annually to £0.058. This means that it has been growing its distributions at 8.1% per annum over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Octopus Renewables Infrastructure Trust to be a consistent dividend paying stock.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Although it's important to note that Octopus Renewables Infrastructure Trust's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Paying more than double what it is paying out, and not showing a track record of being able to grow earnings, we can only see dividend cuts in the future.

Octopus Renewables Infrastructure Trust's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Octopus Renewables Infrastructure Trust (1 is potentially serious!) that you should be aware of before investing. Is Octopus Renewables Infrastructure Trust not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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