Why You Should Leave Artis Real Estate Investment Trust (TSE:AX.UN)’s Upcoming Dividend On The Shelf - Simply Wall St

Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Artis Real Estate Investment Trust (TSE:AX.UN) is about to go ex-dividend in just 4 days. Ex-dividend means that investors that purchase the stock on or after the 30th of July will not receive this dividend, which will be paid on the 15th of August.

Artis Real Estate Investment Trust’s next dividend payment will be CA$0.045 per share, on the back of last year when the company paid a total of CA$0.54 to shareholders. Last year’s total dividend payments show that Artis Real Estate Investment Trust has a trailing yield of 4.6% on the current share price of CA$11.83. If you buy this business for its dividend, you should have an idea of whether Artis Real Estate Investment Trust’s dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it’s growing.

View our latest analysis for Artis Real Estate Investment Trust

If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Its dividend payout ratio is 80% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth It could become a concern if earnings started to decline. That said, REITs are often required by law to distribute all of their earnings, and it’s not unusual to see a REIT with a payout ratio around 100%. We wouldn’t read too much into this. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out more than half (72%) of its free cash flow in the past year, which is within an average range for most companies.

It’s positive to see that Artis Real Estate Investment Trust’s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

TSX:AX.UN Historical Dividend Yield, July 25th 2019

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we’re concerned to see Artis Real Estate Investment Trust’s earnings per share have dropped 13% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Artis Real Estate Investment Trust has seen its dividend decline 6.7% per annum on average over the past 10 years, which is not great to see. It’s never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company’s health in an attempt to maintain it.

To Sum It Up

Has Artis Real Estate Investment Trust got what it takes to maintain its dividend payments? It’s never good to see earnings per share shrinking, but at least the dividend payout ratios appear reasonable. We’re aware though that if earnings continue to decline, the dividend could be at risk. It’s not the most attractive proposition from a dividend perspective, and we’d probably give this one a miss for now.

Wondering what the future holds for Artis Real Estate Investment Trust? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.

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2019-07-25 12:16:13Z
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