Scottish Investment Trust (LON:SCIN) Could Be A Buy For Its Upcoming Dividend

By
Simply Wall St
Published
June 26, 2021
LSE:SCIN
Source: Shutterstock

The Scottish Investment Trust PLC (LON:SCIN) is about to trade ex-dividend in the next three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. Thus, you can purchase Scottish Investment Trust's shares before the 1st of July in order to receive the dividend, which the company will pay on the 2nd of August.

The company's next dividend payment will be UK£0.058 per share. Last year, in total, the company distributed UK£0.23 to shareholders. Calculating the last year's worth of payments shows that Scottish Investment Trust has a trailing yield of 2.9% on the current share price of £8.05. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Scottish Investment Trust has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Scottish Investment Trust

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Scottish Investment Trust paid out a comfortable 41% of its profit last year.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

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

historic-dividend
LSE:SCIN Historic Dividend June 27th 2021

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Scottish Investment Trust's earnings per share have been growing at 17% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Scottish Investment Trust has delivered 8.7% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Has Scottish Investment Trust got what it takes to maintain its dividend payments? Companies like Scottish Investment Trust that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Overall, Scottish Investment Trust looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We've spotted 1 warning sign for Scottish Investment Trust you should be aware of.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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