Schroder BSC Social Impact Trust (LON:SBSI) Is Increasing Its Dividend To £0.0376

The board of Schroder BSC Social Impact Trust plc (LON:SBSI) has announced that it will be paying its dividend of £0.0376 on the 19th of December, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 5.4%, providing a nice boost to shareholder returns.

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Schroder BSC Social Impact Trust's Projections Indicate Future Payments May Be Unsustainable

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

If the company can't turn things around, EPS could fall by 32.0% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 617%, which could put the dividend under pressure if earnings don't start to improve.

See our latest analysis for Schroder BSC Social Impact Trust

Schroder BSC Social Impact Trust Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2021, the annual payment back then was £0.0105, compared to the most recent full-year payment of £0.0376. This implies that the company grew its distributions at a yearly rate of about 38% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Schroder BSC Social Impact Trust's earnings per share has shrunk at 32% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

We're Not Big Fans Of Schroder BSC Social Impact Trust's Dividend

In conclusion, we have some concerns about this dividend, even though it being raised is good. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Schroder BSC Social Impact Trust (of which 2 are a bit concerning!) you should know about. 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.