Cominar Real Estate Investment Trust (TSE:CUF.UN) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 29th of August will not receive this dividend, which will be paid on the 16th of September.
Cominar Real Estate Investment Trust's next dividend payment will be CA$0.06 per share. Last year, in total, the company distributed CA$0.72 to shareholders. Last year's total dividend payments show that Cominar Real Estate Investment Trust has a trailing yield of 5.9% on the current share price of CA$12.29. 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 Cominar Real Estate Investment Trust has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Cominar Real Estate Investment Trust paid out 66% of its earnings to investors last year, a normal payout level for most businesses. While Cominar Real Estate Investment 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. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Cominar Real Estate Investment Trust didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Over the last year it paid out 66% of its free cash flow as dividends, within the usual range for most companies.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Cominar Real Estate Investment Trust reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Cominar Real Estate Investment Trust's dividend payments per share have declined at 6.7% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
Remember, you can always get a snapshot of Cominar Real Estate Investment Trust's financial health, by checking our visualisation of its financial health, here.
The Bottom Line
Is Cominar Real Estate Investment Trust an attractive dividend stock, or better left on the shelf? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. It's not that we think Cominar Real Estate Investment Trust is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
Wondering what the future holds for Cominar Real Estate Investment Trust? See what the two analysts we track 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.