RIT Capital Partners (LON:RCP) Will Pay A Larger Dividend Than Last Year At £0.19

RIT Capital Partners plc (LON:RCP) will increase its dividend from last year's comparable payment on the 28th of April to £0.19. Even though the dividend went up, the yield is still quite low at only 1.9%.

View our latest analysis for RIT Capital Partners

RIT Capital Partners Might Find It Hard To Continue The Dividend

If it is predictable over a long period, even low dividend yields can be attractive. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. These payout levels would generally be quite difficult to keep up.

If the trend of the last few years continues, EPS will grow by 1.2% over the next 12 months. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was £0.28 in 2013, and the most recent fiscal year payment was £0.38. This implies that the company grew its distributions at a yearly rate of about 3.1% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

RIT Capital Partners May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. 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. With EPS growth hard to come by and the company not turning a profit, we wouldn't be particularly optimistic about the growth prospects for RIT Capital Partners' dividend in the future.

RIT Capital Partners' Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think RIT Capital Partners' payments are rock solid. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.