It Might Not Be A Great Idea To Buy Rights and Issues Investment Trust Public Limited Company (LON:RIII) For Its Next Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Rights and Issues Investment Trust Public Limited Company (LON:RIII) is about to trade ex-dividend in the next two days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Rights and Issues Investment Trust's shares on or after the 24th of August will not receive the dividend, which will be paid on the 25th of September.

The company's next dividend payment will be UK£0.12 per share. Last year, in total, the company distributed UK£0.41 to shareholders. Looking at the last 12 months of distributions, Rights and Issues Investment Trust has a trailing yield of approximately 2.2% on its current stock price of £18.3. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Rights and Issues Investment Trust has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Rights and Issues Investment Trust

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Rights and Issues Investment Trust's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover.

Click here to see how much of its profit Rights and Issues Investment Trust paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Rights and Issues Investment Trust was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Rights and Issues Investment Trust has delivered an average of 4.4% per year annual increase in its dividend, based on the past 10 years of dividend payments.

We update our analysis on Rights and Issues Investment Trust every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

Should investors buy Rights and Issues Investment Trust for the upcoming dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Worse, the general trend in its earnings looks negative in recent years. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

With that being said, if you're still considering Rights and Issues Investment Trust as an investment, you'll find it beneficial to know what risks this stock is facing. Every company has risks, and we've spotted 2 warning signs for Rights and Issues Investment Trust you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.