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It looks like LTC Properties, Inc. (NYSE:LTC) is about to go ex-dividend in the next 3 days. You will need to purchase shares before the 22nd of July to receive the dividend, which will be paid on the 31st of July.
LTC Properties's upcoming dividend is US$0.19 a share, following on from the last 12 months, when the company distributed a total of US$2.28 per share to shareholders. Last year's total dividend payments show that LTC Properties has a trailing yield of 4.8% on the current share price of $47.04. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether LTC 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. LTC Properties paid out 75% of its earnings to investors last year, a normal payout level for most businesses. While LTC 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. 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 75% 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 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.
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. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see LTC Properties's earnings have been skyrocketing, up 20% per annum 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. Since the start of our data, 10 years ago, LTC Properties has lifted its dividend by approximately 3.9% a year on average. Earnings per share have been growing much quicker than dividends, potentially because LTC Properties is keeping back more of its profits to grow the business.
Is LTC Properties an attractive dividend stock, or better left on the shelf? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see LTC Properties's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 75% and 75% respectively. Overall, it's hard to get excited about LTC Properties from a dividend perspective.
Curious what other investors think of LTC Properties? 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.
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 firstname.lastname@example.org. 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.