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Keppel DC REIT (SGX:AJBU) stock is about to trade ex-dividend in 4 days time. You will need to purchase shares before the 23rd of July to receive the dividend, which will be paid on the 28th of August.
Keppel DC REIT's next dividend payment will be S$0.038 per share. Last year, in total, the company distributed S$0.077 to shareholders. Looking at the last 12 months of distributions, Keppel DC REIT has a trailing yield of approximately 4.5% on its current stock price of SGD1.73. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is 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. Keppel DC REIT is paying out an acceptable 67% of its profit, a common payout level among 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. A useful secondary check can be to evaluate whether Keppel DC REIT generated enough free cash flow to afford its dividend. It paid out more than half (67%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that Keppel DC REIT'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?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we're not overly excited about Keppel DC REIT's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 4 years, Keppel DC REIT has increased its dividend at approximately 2.0% a year on average.
To Sum It Up
Is Keppel DC REIT worth buying for its dividend? While earnings per share are flat, at least Keppel DC REIT has not committed itself to an unsustainable dividend, with its earnings and cashflow payout ratios within reasonable bounds. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.
Ever wonder what the future holds for Keppel DC REIT? See what the nine 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.
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 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.