In This Article:
The board of Octopus Renewables Infrastructure Trust plc (LON:ORIT) has announced that the dividend on 2nd of June will be increased to £0.0144, which will be 9.9% higher than last year's payment of £0.0131 which covered the same period. This makes the dividend yield 5.1%, which is above the industry average.
See our latest analysis for Octopus Renewables Infrastructure Trust
Octopus Renewables Infrastructure Trust's Earnings Easily Cover The Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite comfortably covered by Octopus Renewables Infrastructure Trust's earnings, but it was a bit tighter on the cash flow front. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.
Looking forward, earnings per share could rise by 41.2% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 34%, which is in the range that makes us comfortable with the sustainability of the dividend.
Octopus Renewables Infrastructure Trust Is Still Building Its Track Record
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 3 years was £0.0424 in 2020, and the most recent fiscal year payment was £0.0524. This implies that the company grew its distributions at a yearly rate of about 7.3% over that duration. Octopus Renewables Infrastructure Trust has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Octopus Renewables Infrastructure Trust has seen EPS rising for the last five years, at 41% per annum. Octopus Renewables Infrastructure Trust is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
Our Thoughts On Octopus Renewables Infrastructure Trust's Dividend
In summary, while it's always good to see the dividend being raised, we don't think Octopus Renewables Infrastructure Trust's payments are rock solid. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We don't think Octopus Renewables Infrastructure Trust is a great stock to add to your portfolio if income is your focus.