RIT Capital Partners (LON:RCP) Will Pay A Larger Dividend Than Last Year At £0.19
The board of RIT Capital Partners Plc (LON:RCP) has announced that the dividend on 27th of October will be increased to £0.19, which will be 2.7% higher than last year's payment of £0.185 which covered the same period. Although the dividend is now higher, the yield is only 2.0%, which is below the industry average.
View our latest analysis for RIT Capital Partners
RIT Capital Partners Might Find It Hard To Continue The Dividend
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Even though RIT Capital Partners isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.
Looking forward, earnings per share could fall by 15.2% over the next year if the trend of the last few years can't be broken. While this means that the company will be unprofitable, we generally believe cash flows are more important, and the current cash payout ratio is quite healthy, which gives us comfort.
RIT Capital Partners Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from £0.20 total annually to £0.38. This works out to be a compound annual growth rate (CAGR) of approximately 6.6% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
Dividend Growth Potential Is Shaky
Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. RIT Capital Partners' earnings per share has shrunk at 15% 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.
In Summary
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for RIT Capital Partners that you should be aware of before investing. 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.
