Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Artis Real Estate Investment Trust (TSE:AX.UN) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 30th of October in order to be eligible for this dividend, which will be paid on the 15th of November.
Artis Real Estate Investment Trust’s next dividend payment will be CA$0.04 per share, on the back of last year when the company paid a total of CA$0.5 to shareholders. Based on the last year’s worth of payments, Artis Real Estate Investment Trust stock has a trailing yield of around 4.4% on the current share price of CA$12.26. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it’s growing.
See our latest analysis for Artis Real Estate Investment Trust
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Artis Real Estate Investment Trust paid out 68% of its earnings to investors last year, a normal payout level for most businesses. While Artis Real Estate Investment Trust seems to be paying out a very high percentage of its income, REITs have different dividend payment behaviour and so, while we don’t think this is great, we also don’t think it is unusual. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (61%) of its free cash flow in the past year, which is within an average range for most companies.
It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
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. Artis Real Estate Investment Trust’s earnings per share have fallen at approximately 24% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Artis Real Estate Investment Trust’s dividend payments per share have declined at 6.7% per year on average over the past ten years, which is uninspiring. While it’s not great that earnings and dividends per share have fallen in recent years, we’re encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
The Bottom Line
Has Artis Real Estate Investment Trust got what it takes to maintain its dividend payments? While earnings per share are shrinking, it’s encouraging to see that at least Artis Real Estate Investment Trust’s dividend appears sustainable, with earnings and cashflow payout ratios that are within reasonable bounds. With the way things are shaping up from a dividend perspective, we’d be inclined to steer clear of Artis Real Estate Investment Trust.
Curious what other investors think of Artis Real Estate Investment Trust? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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2019-10-25 10:03:17Z
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