M&G Credit Income Investment Trust plc (LON:MGCI) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 5th of November will not receive this dividend, which will be paid on the 27th of November.

M&G Credit Income Investment Trust's next dividend payment will be UK£0.0071 per share. Last year, in total, the company distributed UK£0.037 to shareholders. Based on the last year's worth of payments, M&G Credit Income Investment Trust has a trailing yield of 3.5% on the current stock price of £0.8875. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for M&G Credit Income Investment Trust

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. M&G Credit Income Investment Trust paid out 71% of its earnings to investors last year, a normal payout level for most businesses.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit M&G Credit Income Investment Trust paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend.

We'd also point out that M&G Credit Income Investment 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.

Given that M&G Credit Income Investment Trust has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Is M&G Credit Income Investment Trust worth buying for its dividend? M&G Credit Income Investment Trust has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. We're unconvinced on the company's merits, and think there might be better opportunities out there.

With that being said, if dividends aren't your biggest concern with M&G Credit Income Investment Trust, you should know about the other risks facing this business. For instance, we've identified 4 warning signs for M&G Credit Income Investment Trust (1 is concerning) you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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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