Fronsac Real Estate Investment Trust (CVE:FRO.UN) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 13th of September to receive the dividend, which will be paid on the 30th of September.
Fronsac Real Estate Investment Trust's upcoming dividend is CA$0.0019 a share, following on from the last 12 months, when the company distributed a total of CA$0.022 per share to shareholders. Based on the last year's worth of payments, Fronsac Real Estate Investment Trust has a trailing yield of 3.2% on the current stock price of CA$0.69. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fronsac Real Estate Investment Trust paid out more than half (54%) 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. 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 Fronsac 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. Dividends consumed 54% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fronsac Real Estate Investment Trust was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
Fronsac Real Estate Investment 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. It's hard to grow dividends per share when a company keeps creating new shares.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 7 years, Fronsac Real Estate Investment Trust has increased its dividend at approximately 8.6% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Remember, you can always get a snapshot of Fronsac Real Estate Investment Trust's financial health, by checking our visualisation of its financial health, here.
Is Fronsac 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. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
Keen to explore more data on Fronsac Real Estate Investment Trust's financial performance? Check out our visualisation of its historical revenue and earnings growth.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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