Don't Buy Schroder BSC Social Impact Trust plc (LON:SBSI) For Its Next Dividend Without Doing These Checks
It looks like Schroder BSC Social Impact Trust plc (LON:SBSI) is about to go ex-dividend in the next three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Schroder BSC Social Impact Trust's shares on or after the 3rd of November, you won't be eligible to receive the dividend, when it is paid on the 6th of December.
The company's next dividend payment will be UK£0.013 per share, and in the last 12 months, the company paid a total of UK£0.013 per share. Based on the last year's worth of payments, Schroder BSC Social Impact Trust has a trailing yield of 1.3% on the current stock price of £0.965. If you buy this business for its dividend, you should have an idea of whether Schroder BSC Social Impact Trust's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Schroder BSC Social Impact Trust
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Schroder BSC Social Impact Trust is paying out an acceptable 73% of its profit, a common payout level among most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. From this perspective, we're disturbed to see earnings per share plunged 27% over the last 12 months, and we'd wonder if the company has had some kind of major event that has skewed the calculation.
We'd also point out that Schroder BSC Social Impact 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 Schroder BSC Social Impact Trust has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
To Sum It Up
Has Schroder BSC Social Impact Trust got what it takes to maintain its dividend payments? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.
So if you're still interested in Schroder BSC Social Impact Trust despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For instance, we've identified 6 warning signs for Schroder BSC Social Impact Trust (1 shouldn't be ignored) you should be aware of.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
