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Here's Why We're Wary Of Buying Independent Investment Trust's (LON:IIT) For Its Upcoming Dividend

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Simply Wall St
·3 min read
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The Independent Investment Trust PLC (LON:IIT) is about to trade ex-dividend in the next four days. This means that investors who purchase shares on or after the 18th of February will not receive the dividend, which will be paid on the 9th of April.

Independent Investment Trust's next dividend payment will be UK£0.05 per share, on the back of last year when the company paid a total of UK£0.08 to shareholders. Based on the last year's worth of payments, Independent Investment Trust has a trailing yield of 1.5% on the current stock price of £5.4. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Independent Investment Trust can afford its dividend, and if the dividend could grow.

See our latest analysis for Independent 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. Independent Investment Trust lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable.

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

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Independent Investment Trust reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Independent Investment Trust has delivered an average of 4.8% per year annual increase in its dividend, based on the past 10 years of dividend payments.

Remember, you can always get a snapshot of Independent Investment Trust's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

Has Independent Investment Trust got what it takes to maintain its dividend payments? It's definitely not great to see that it paid a dividend despite reporting a loss last year. Worse, the general trend in its earnings looks negative in recent times. Independent Investment Trust doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Independent Investment Trust. To help with this, we've discovered 2 warning signs for Independent Investment Trust that you should be aware of before investing in their shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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.

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