Octopus Renewables Infrastructure Trust (LON:ORIT) Has Announced A Dividend Of £0.0145

Octopus Renewables Infrastructure Trust plc (LON:ORIT) has announced that it will pay a dividend of £0.0145 per share on the 23rd of February. This makes the dividend yield 6.7%, which is above the industry average.

Check out our latest analysis for Octopus Renewables Infrastructure Trust

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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 281% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Looking forward, EPS could fall by 2.3% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 334%, which could put the dividend under pressure if earnings don't start to improve.

Octopus Renewables Infrastructure Trust Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of £0.0424 in 2021 to the most recent total annual payment of £0.058. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Octopus Renewables Infrastructure Trust has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. In the last five years, Octopus Renewables Infrastructure Trust's earnings per share has shrunk at approximately 2.3% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

We're Not Big Fans Of Octopus Renewables Infrastructure Trust's Dividend

Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, this doesn't get us very excited from an income standpoint.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for Octopus Renewables Infrastructure Trust (2 shouldn't be ignored!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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