RIT Capital Partners' (LON:RCP) Shareholders Will Receive A Bigger Dividend Than Last Year
RIT Capital Partners plc's (LON:RCP) dividend will be increasing from last year's payment of the same period to £0.19 on 28th of April. Even though the dividend went up, the yield is still quite low at only 1.9%.
Check out our latest analysis for RIT Capital Partners
RIT Capital Partners' Distributions May Be Difficult To Sustain
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. RIT Capital Partners isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. These payout levels would generally be quite difficult to keep up.
If the trend of the last few years continues, EPS will grow by 1.2% over the next 12 months. 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 happens fairly soon, the dividend could start to come under pressure.
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 £0.28 in 2013, and the most recent fiscal year payment was £0.38. This means that it has been growing its distributions at 3.1% per annum over that time. 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. Unfortunately, RIT Capital Partners' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Earnings growth isn't particularly strong, and if the company isn't able to become profitable fairly soon, the dividend could come under pressure.
RIT Capital Partners' Dividend Doesn't Look Sustainable
In summary, while it's always good to see the dividend being raised, we don't think RIT Capital Partners' payments are rock solid. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think RIT Capital Partners is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 1 warning sign for RIT Capital Partners that investors should know about before committing capital to this stock. Is RIT Capital Partners 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.
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