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

Octopus Renewables Infrastructure Trust plc (LON:ORIT) will increase its dividend on the 1st of December to £0.0145, which is 11% higher than last year's payment from the same period of £0.0131. This will take the dividend yield to an attractive 6.2%, providing a nice boost to shareholder returns.

Check out our latest analysis for Octopus Renewables Infrastructure Trust

Octopus Renewables Infrastructure Trust Is Paying Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Looking forward, EPS could fall by 2.3% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 326%, which is definitely a bit high to be sustainable going forward.

Octopus Renewables Infrastructure Trust Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The annual payment during the last 3 years was £0.0424 in 2020, and the most recent fiscal year payment was £0.058. This means that it has been growing its distributions at 11% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. In the last five years, Octopus Renewables Infrastructure Trust's earnings per share has shrunk at approximately 2.3% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

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

In summary, investors will like to be receiving a higher dividend, but we have some questions about whether it can be sustained over the long term. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. We don't think that this is a great candidate to be an income stock.

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 identified 3 warning signs for Octopus Renewables Infrastructure Trust (2 make us uncomfortable!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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