Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Boardwalk Real Estate Investment Trust (TSE:BEI.UN) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 30th of July to receive the dividend, which will be paid on the 15th of August.
Boardwalk Real Estate Investment Trust's next dividend payment will be CA$0.083 per share. Last year, in total, the company distributed CA$1.00 to shareholders. Last year's total dividend payments show that Boardwalk Real Estate Investment Trust has a trailing yield of 2.4% on the current share price of CA$41.87. If you buy this business for its dividend, you should have an idea of whether Boardwalk Real Estate Investment Trust's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Boardwalk Real Estate Investment Trust paying out a modest 40% of its earnings. While Boardwalk 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. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 40% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Boardwalk Real Estate Investment 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.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by Boardwalk Real Estate Investment Trust's 18% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Boardwalk Real Estate Investment Trust's dividend payments per share have declined at 5.7% 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.
The Bottom Line
Has Boardwalk Real Estate Investment Trust got what it takes to maintain its dividend payments? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
Ever wonder what the future holds for Boardwalk Real Estate Investment Trust? See what the five analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.