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Schroder BSC Social Impact Trust plc (LON:SBSI) stock is about to trade ex-dividend in three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Schroder BSC Social Impact Trust investors that purchase the stock on or after the 14th of November will not receive the dividend, which will be paid on the 20th of December.
The company's next dividend payment will be UK£0.0294 per share, on the back of last year when the company paid a total of UK£0.029 to shareholders. Looking at the last 12 months of distributions, Schroder BSC Social Impact Trust has a trailing yield of approximately 3.6% on its current stock price of UK£0.815. 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 check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Schroder BSC Social Impact Trust
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. Schroder BSC Social Impact Trust paid out a disturbingly high 235% of its profit as dividends last year, which makes us concerned there's something we don't fully understand in the business.
When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Schroder BSC Social Impact Trust's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 31% a year over the past three years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Schroder BSC Social Impact Trust has delivered an average of 41% per year annual increase in its dividend, based on the past three years of dividend payments. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Schroder BSC Social Impact Trust is already paying out 235% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.