M&G Credit Income Investment Trust's (LON:MGCI) Dividend Will Be Increased To £0.0243
M&G Credit Income Investment Trust plc (LON:MGCI) has announced that it will be increasing its dividend from last year's comparable payment on the 24th of February to £0.0243. This will take the annual payment to 4.1% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for M&G Credit Income Investment Trust
M&G Credit Income Investment Trust's Distributions May Be Difficult To Sustain
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. M&G Credit Income Investment Trust isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. This makes us feel that the dividend will be hard to maintain.
Over the next year, EPS might fall by 17.7% based on recent performance. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.
M&G Credit Income Investment Trust's Dividend Has Lacked Consistency
Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. Since 2020, the annual payment back then was £0.0209, compared to the most recent full-year payment of £0.0404. This means that it has been growing its distributions at 25% per annum over that time. M&G Credit Income Investment Trust has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Has Limited Growth Potential
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. M&G Credit Income Investment Trust's earnings per share has shrunk at 18% a year over the past three 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.
M&G Credit Income Investment Trust's Dividend Doesn't Look Great
Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, this doesn't get us very excited from an income standpoint.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 3 warning signs for M&G Credit Income Investment Trust that investors should take into consideration. Is M&G Credit Income Investment Trust 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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