Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that National Storage Affiliates Trust (NYSE:NSA) is about to go ex-dividend in just 4 days. This means that investors who purchase shares on or after the 12th of September will not receive the dividend, which will be paid on the 30th of September.
National Storage Affiliates Trust's upcoming dividend is US$0.32 a share, following on from the last 12 months, when the company distributed a total of US$1.28 per share to shareholders. Based on the last year's worth of payments, National Storage Affiliates Trust stock has a trailing yield of around 3.8% on the current share price of $33.85. If you buy this business for its dividend, you should have an idea of whether National Storage Affiliates Trust's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. National Storage Affiliates Trust paid out more than half (62%) of its earnings last year, which is a regular payout ratio for most companies. While National Storage Affiliates 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. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It distributed 50% of its free cash flow as dividends, a comfortable payout level for most companies.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. National Storage Affiliates Trust was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last 5 years, making us wonder if the dividend is sustainable at all.
National Storage Affiliates 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. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 4 years ago, National Storage Affiliates Trust has lifted its dividend by approximately 21% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.
Is National Storage Affiliates 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 might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.
Ever wonder what the future holds for National Storage Affiliates Trust? See what the five 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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