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Only 4 Days Left To Cash In On Liberty Property Trust (NYSE:LPT) Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Liberty Property Trust (NYSE:LPT) is about to trade ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 30th of September will not receive the dividend, which will be paid on the 15th of October.

Liberty Property Trust's next dividend payment will be US$0.4 per share, on the back of last year when the company paid a total of US$1.6 to shareholders. Looking at the last 12 months of distributions, Liberty Property Trust has a trailing yield of approximately 3.2% on its current stock price of $50.93. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Liberty Property Trust

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. Liberty Property Trust paid out more than half (59%) of its earnings last year, which is a regular payout ratio for most companies. That said, REITs are often required by law to distribute all of their earnings, and it's not unusual to see a REIT with a payout ratio around 100%. We wouldn't read too much into this. 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 80% 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 positive to see that Liberty Property Trust's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

NYSE:LPT Historical Dividend Yield, September 25th 2019
NYSE:LPT Historical Dividend Yield, September 25th 2019

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Liberty Property Trust's earnings per share have been growing at 15% a year for the past five years. It paid out more than three-quarters of its earnings in the last year, even though earnings per share are growing rapidly. Higher earnings generally bode well for growing dividends, although with seemingly strong growth prospects we'd wonder why management are not reinvesting more in the business.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Liberty Property Trust's dividend payments per share have declined at 1.5% per year on average over the past ten years, which is uninspiring.

The Bottom Line

Has Liberty Property Trust got what it takes to maintain its dividend payments? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that Liberty Property Trust is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. All things considered, we are not particularly enthused about Liberty Property Trust from a dividend perspective.

Curious what other investors think of Liberty Property Trust? 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 editorial-team@simplywallst.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.