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

Octopus Renewables Infrastructure Trust plc (LON:ORIT) has announced that it will be increasing its periodic dividend on the 30th of May to £0.0154, which will be 2.7% higher than last year's comparable payment amount of £0.015. This will take the dividend yield to an attractive 8.1%, providing a nice boost to shareholder returns.

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Octopus Renewables Infrastructure Trust's Projections Indicate Future Payments May Be Unsustainable

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 288% of what it was earning and 77% 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.

Looking forward, EPS could fall by 0.6% 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 321%, which is definitely a bit high to be sustainable going forward.

Check out our latest analysis for Octopus Renewables Infrastructure Trust

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

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from an annual total of £0.0424 in 2020 to the most recent total annual payment of £0.0602. This works out to be a compound annual growth rate (CAGR) of approximately 7.3% a year 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.

Octopus Renewables Infrastructure Trust May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Octopus Renewables Infrastructure Trust hasn't seen much change in its earnings per share over the last five years.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think Octopus Renewables Infrastructure Trust is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Octopus Renewables Infrastructure Trust (1 can't be ignored!) 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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