Readers hoping to buy Mapletree North Asia Commercial Trust (SGX:RW0U) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 5th of August will not receive the dividend, which will be paid on the 27th of August.
Mapletree North Asia Commercial Trust's next dividend payment will be S$0.019 per share. Last year, in total, the company distributed S$0.078 to shareholders. Looking at the last 12 months of distributions, Mapletree North Asia Commercial Trust has a trailing yield of approximately 5.5% on its current stock price of SGD1.42. If you buy this business for its dividend, you should have an idea of whether Mapletree North Asia Commercial Trust's dividend is reliable and sustainable. So we need to investigate whether Mapletree North Asia Commercial Trust can afford its dividend, and if the dividend could grow.
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. Mapletree North Asia Commercial Trust is paying out an acceptable 64% of its profit, a common payout level among most companies. While Mapletree North Asia Commercial 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 flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out more than half (64%) 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.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Mapletree North Asia Commercial Trust, with earnings per share up 8.5% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 6 years, Mapletree North Asia Commercial Trust has increased its dividend at approximately 3.5% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Has Mapletree North Asia Commercial Trust got what it takes to maintain its dividend payments? Earnings per share have been growing modestly and Mapletree North Asia Commercial Trust paid out a bit over half of its earnings and free cash flow last year. To summarise, Mapletree North Asia Commercial Trust looks okay on this analysis, although it doesn't appear a stand-out opportunity.
Ever wonder what the future holds for Mapletree North Asia Commercial Trust? See what the six 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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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.