U.S. Markets open in 7 hrs 12 mins

New England Realty Associates Limited Partnership (NYSEMKT:NEN)'s Could Be A Buy For Its Upcoming Dividend

Simply Wall St

New England Realty Associates Limited Partnership (NYSEMKT:NEN) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 13th of September in order to receive the dividend, which the company will pay on the 30th of September.

New England Realty Associates Limited Partnership's next dividend payment will be US$0.32 per share. Last year, in total, the company distributed US$1.28 to shareholders. Based on the last year's worth of payments, New England Realty Associates Limited Partnership stock has a trailing yield of around 2.2% on the current share price of $59.305. 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.

View our latest analysis for New England Realty Associates Limited Partnership

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 84% 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 We'd be worried about the risk of a drop in earnings. A useful secondary check can be to evaluate whether New England Realty Associates Limited Partnership generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 18% of its cash flow last year.

It's positive to see that New England Realty Associates Limited Partnership'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 how much of its profit New England Realty Associates Limited Partnership paid out over the last 12 months.

AMEX:NEN Historical Dividend Yield, September 8th 2019

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see New England Realty Associates Limited Partnership has grown its earnings rapidly, up 24% a year for the past five years. The company is paying out more than three-quarters of its earnings, but it is also generating strong earnings growth.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. New England Realty Associates Limited Partnership has delivered an average of 3.2% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

From a dividend perspective, should investors buy or avoid New England Realty Associates Limited Partnership? New England Realty Associates Limited Partnership's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. There's a lot to like about New England Realty Associates Limited Partnership, and we would prioritise taking a closer look at it.

Keen to explore more data on New England Realty Associates Limited Partnership's financial performance? Check out our visualisation of its historical revenue and earnings growth.

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.