Octopus Renewables Infrastructure Trust's (LON:ORIT) Shareholders Will Receive A Bigger Dividend Than Last Year

Octopus Renewables Infrastructure Trust plc's (LON:ORIT) periodic dividend will be increasing on the 2nd of June to £0.0144, with investors receiving 9.9% more than last year's £0.0131. This takes the dividend yield to 5.1%, which shareholders will be pleased with.

See our latest analysis for Octopus Renewables Infrastructure Trust

Octopus Renewables Infrastructure Trust's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. 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. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

If the trend of the last few years continues, EPS will grow by 41.2% over the next 12 months. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

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 annual payment back then was £0.0424, compared to the most recent full-year payment of £0.0524. This means that it has been growing its distributions at 7.3% 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 Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Octopus Renewables Infrastructure Trust has grown earnings per share at 41% per year over the past five years. Octopus Renewables Infrastructure Trust is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Octopus Renewables Infrastructure Trust will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Octopus Renewables Infrastructure Trust has been making. 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. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Octopus Renewables Infrastructure Trust that investors need to be conscious of moving forward. 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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