Octopus Renewables Infrastructure Trust's (LON:ORIT) Dividend Will Be £0.0131

Octopus Renewables Infrastructure Trust plc (LON:ORIT) has announced that it will pay a dividend of £0.0131 per share on the 24th of February. This makes the dividend yield 5.0%, which will augment investor returns quite nicely.

See our latest analysis for Octopus Renewables Infrastructure Trust

Octopus Renewables Infrastructure Trust's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Octopus Renewables Infrastructure Trust was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

Over the next year, EPS could expand by 49.9% if recent trends continue. If the dividend continues on this path, the payout ratio could be 22% by next year, which we think can be pretty sustainable going forward.

Octopus Renewables Infrastructure Trust Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. Since 2021, the dividend has gone from £0.0424 total annually to £0.0524. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. 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.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Octopus Renewables Infrastructure Trust has grown earnings per share at 50% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Octopus Renewables Infrastructure Trust's payments, as there could be some issues with sustaining them into the future. While Octopus Renewables Infrastructure Trust is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

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 instance, we've picked out 1 warning sign for Octopus Renewables Infrastructure Trust that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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