Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see M&G Credit Income Investment Trust plc (LON:MGCI) is about to trade ex-dividend in the next three days. This means that investors who purchase shares on or after the 4th of February will not receive the dividend, which will be paid on the 26th of February.
M&G Credit Income Investment Trust's upcoming dividend is UK£0.019 a share, following on from the last 12 months, when the company distributed a total of UK£0.037 per share to shareholders. Last year's total dividend payments show that M&G Credit Income Investment Trust has a trailing yield of 3.2% on the current share price of £0.9. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether M&G Credit Income Investment Trust can afford its dividend, and if the dividend could grow.
Check out our latest analysis for M&G Credit Income 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. M&G Credit Income Investment Trust paid out 71% of its earnings to investors last year, a normal payout level for most businesses.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Click here to see how much of its profit M&G Credit Income Investment Trust paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously.
We'd also point out that M&G Credit Income Investment Trust issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.
Unfortunately M&G Credit Income Investment Trust has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
Is M&G Credit Income Investment Trust worth buying for its dividend? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.
So if you want to do more digging on M&G Credit Income Investment Trust, you'll find it worthwhile knowing the risks that this stock faces. We've identified 4 warning signs with M&G Credit Income Investment Trust (at least 1 which is concerning), and understanding them should be part of your investment process.
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.
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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