Rights and Issues Investment Trust (LON:RIII) Is Due To Pay A Dividend Of £0.1075

Rights and Issues Investment Trust Public Limited Company's (LON:RIII) investors are due to receive a payment of £0.1075 per share on 26th of September. This means the annual payment will be 1.6% of the current stock price, which is lower than the industry average.

Check out our latest analysis for Rights and Issues Investment Trust

Rights and Issues Investment Trust Might Find It Hard To Continue The Dividend

If it is predictable over a long period, even low dividend yields can be attractive. Even though Rights and Issues Investment Trust is not generating a profit, it is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Looking forward, earnings per share could rise by 3.5% over the next year if the trend from the last few years continues. The company seems to be going down the right path, but it will probably take a little bit longer than a year to cross over into profitability. Unless this can be done in short order, the dividend might be difficult to sustain.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was £0.255 in 2012, and the most recent fiscal year payment was £0.348. This means that it has been growing its distributions at 3.1% per annum over that time. 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.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Rights and Issues Investment Trust has only grown its earnings per share at 3.5% per annum over the past five years. 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 Rights and Issues Investment Trust's dividend in the future.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The track record isn't great, and the payments are a bit high to be considered sustainable. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Rights and Issues Investment Trust that investors should take into consideration. Is Rights and Issues Investment Trust not quite the opportunity you were looking for? Why not check out our selection of top 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.