It looks like Gaming and Leisure Properties, Inc. (NASDAQ:GLPI) is about to go ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 5th of September will not receive the dividend, which will be paid on the 20th of September.
Gaming and Leisure Properties's upcoming dividend is US$0.68 a share, following on from the last 12 months, when the company distributed a total of US$2.72 per share to shareholders. Based on the last year's worth of payments, Gaming and Leisure Properties stock has a trailing yield of around 7.0% on the current share price of $39.12. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Gaming and Leisure Properties has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Gaming and Leisure Properties paid out 107% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. While Gaming and Leisure Properties 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. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 80% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Gaming and Leisure Properties fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Gaming and Leisure Properties has grown its earnings rapidly, up 64% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 6 years, Gaming and Leisure Properties has lifted its dividend by approximately 4.6% a year on average. 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.
Has Gaming and Leisure Properties got what it takes to maintain its dividend payments? Gaming and Leisure Properties has been growing its earnings per share nicely, although judging by the difference between its profit and cashflow payout ratios, the company might have reported some write-offs over the last year. To summarise, Gaming and Leisure Properties looks okay on this analysis, although it doesn't appear a stand-out opportunity.
Ever wonder what the future holds for Gaming and Leisure Properties? See what the 11 analysts we track 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.
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