Investors who want to cash in on Ares Commercial Real Estate Corporation’s (NYSE:ACRE) upcoming dividend of US$0.28 per share have only 2 days left to buy the shares before its ex-dividend date, 28 June 2018, in time for dividends payable on the 17 July 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Ares Commercial Real Estate’s latest financial data to analyse its dividend characteristics. View out our latest analysis for Ares Commercial Real Estate
5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is their annual yield among the top 25% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has it increased its dividend per share amount over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does Ares Commercial Real Estate fit our criteria?
REITs are a special-case dividend payer. This is because a high percentage of their earnings are required to be paid out as dividends. Ares Commercial Real Estate has a trailing twelve-month payout ratio of 93.32%, which is in-line with most other REIT stocks. In the near future, analysts are predicting a payout ratio of 95.65%, leading to a dividend yield of 8.17%. In addition to this, EPS should increase to $1.25.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider Ares Commercial Real Estate as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Ares Commercial Real Estate has a yield of 7.96%, which is on the low-side for Mortgage REITs stocks.
After digging a little deeper into Ares Commercial Real Estate’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three key aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for ACRE’s future growth? Take a look at our free research report of analyst consensus for ACRE’s outlook.
- Valuation: What is ACRE worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether ACRE is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.