Rights and Issues Investment Trust's (LON:RIII) Dividend Will Be £0.1075

Rights and Issues Investment Trust Public Limited Company (LON:RIII) will pay a dividend of £0.1075 on the 26th of September. This means the annual payment will be 1.6% of the current stock price, which is lower than the industry average.

See our latest analysis for Rights and Issues Investment Trust

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

Even a low dividend yield can be attractive if it is sustained for years on end. Even in the absence of profits, Rights and Issues Investment Trust is paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

If the trend of the last few years continues, EPS will grow by 3.5% 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. Unless this can be done in short order, the dividend might be difficult to sustain.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the dividend has gone from £0.255 total annually to £0.348. This implies that the company grew its distributions at a yearly rate of about 3.1% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth May Be Hard To Achieve

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. However, Rights and Issues Investment Trust has only grown its earnings per share at 3.5% per annum over the past five years. Earnings growth isn't particularly strong, and if the company isn't able to become profitable fairly soon, the dividend could come under pressure.

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 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Rights and Issues Investment Trust that investors should know about before committing capital to this stock. 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.