RIT Capital Partners' (LON:RCP) Upcoming Dividend Will Be Larger Than Last Year's

RIT Capital Partners Plc (LON:RCP) will increase its dividend on the 25th of April to £0.215, which is 10% higher than last year's payment from the same period of £0.195. Even though the dividend went up, the yield is still quite low at only 2.0%.

View our latest analysis for RIT Capital Partners

RIT Capital Partners' Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, RIT Capital Partners was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Unless the company can turn things around, EPS could fall by 0.5% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 20%, which is definitely feasible to continue.

RIT Capital Partners Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was £0.294 in 2015, and the most recent fiscal year payment was £0.39. This works out to be a compound annual growth rate (CAGR) of approximately 2.9% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

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. Let's not jump to conclusions as things might not be as good as they appear on the surface. Unfortunately, RIT Capital Partners' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. Taking the debate a bit further, we've identified 1 warning sign for RIT Capital Partners 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.