Octopus Renewables Infrastructure Trust plc's (LON:ORIT) investors are due to receive a payment of £0.0131 per share on 24th of February. This makes the dividend yield 5.0%, which will augment investor returns quite nicely.

View our latest analysis for Octopus Renewables Infrastructure Trust

Octopus Renewables Infrastructure Trust's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Octopus Renewables Infrastructure Trust was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Over the next year, EPS could expand by 49.9% if recent trends continue. If the dividend continues on this path, the payout ratio could be 22% by next year, which we think can be pretty sustainable going forward.

Octopus Renewables Infrastructure Trust Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of £0.0424 in 2021 to the most recent total annual payment of £0.0524. This means that it has been growing its distributions at 11% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

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 impressed us by growing EPS at 50% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Octopus Renewables Infrastructure Trust's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Octopus Renewables Infrastructure Trust is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Octopus Renewables Infrastructure Trust that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.