Readers hoping to buy M&G Credit Income Investment Trust plc (LON:MGCI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 6th of August in order to be eligible for this dividend, which will be paid on the 28th of August.
M&G Credit Income Investment Trust's next dividend payment will be UK£0.0077 per share, and in the last 12 months, the company paid a total of UK£0.037 per share. Based on the last year's worth of payments, M&G Credit Income Investment Trust has a trailing yield of 3.9% on the current stock price of £0.96. If you buy this business for its dividend, you should have an idea of whether M&G Credit Income Investment Trust's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. M&G Credit Income Investment Trust paid out more than half (71%) of its earnings last year, which is a regular payout ratio for most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
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 earnings fall far enough, the company could be forced to cut its dividend.
We'd also point out that M&G Credit Income Investment Trust issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
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.
The Bottom Line
Has M&G Credit Income Investment Trust got what it takes to maintain its dividend payments? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.
However if you're still interested in M&G Credit Income Investment Trust as a potential investment, you should definitely consider some of the risks involved with M&G Credit Income Investment Trust. Be aware that M&G Credit Income Investment Trust is showing 4 warning signs in our investment analysis, and 1 of those is significant...
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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