KKR Real Estate Finance Trust Inc. (NYSE:KREF) stock is about to trade ex-dividend in 3 days time. Ex-dividend means that investors that purchase the stock on or after the 27th of September will not receive this dividend, which will be paid on the 16th of October.
KKR Real Estate Finance Trust's next dividend payment will be US$0.4 per share. Last year, in total, the company distributed US$1.7 to shareholders. Last year's total dividend payments show that KKR Real Estate Finance Trust has a trailing yield of 8.6% on the current share price of $20.07. If you buy this business for its dividend, you should have an idea of whether KKR Real Estate Finance Trust's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. KKR Real Estate Finance Trust distributed an unsustainably high 119% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious.
Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see KKR Real Estate Finance Trust's earnings have been skyrocketing, up 53% per annum for the past five years.
KKR Real Estate Finance Trust also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last two years, KKR Real Estate Finance Trust has lifted its dividend by approximately 16% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
From a dividend perspective, should investors buy or avoid KKR Real Estate Finance Trust? KKR Real Estate Finance Trust has been generating credible earnings per share growth, although its dividend payments were not adequately covered by earnings. We think there are likely better opportunities out there.
Curious what other investors think of KKR Real Estate Finance Trust? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
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.
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If you spot an error that warrants correction, please contact the editor at email@example.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.