Why It Might Not Make Sense To Buy Urban Edge Properties (NYSE:UE) For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Urban Edge Properties (NYSE:UE) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 12th of September in order to be eligible for this dividend, which will be paid on the 30th of September.
Urban Edge Properties's next dividend payment will be US$0.22 per share, and in the last 12 months, the company paid a total of US$0.88 per share. Looking at the last 12 months of distributions, Urban Edge Properties has a trailing yield of approximately 4.7% on its current stock price of $18.92. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Urban Edge Properties can afford its dividend, and if the dividend could grow.
See our latest analysis for Urban Edge Properties
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. Urban Edge Properties is paying out an acceptable 58% of its profit, a common payout level among most companies. While Urban Edge Properties 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. A useful secondary check can be to evaluate whether Urban Edge Properties generated enough free cash flow to afford its dividend. It paid out 75% 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 encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Urban Edge Properties's earnings per share have fallen at approximately 8.4% a year over the previous 5 years. Such a sharp decline casts doubt on the future sustainability of the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Urban Edge Properties has delivered 1.9% dividend growth per year on average over the past 5 years.
Final Takeaway
Is Urban Edge Properties an attractive dividend stock, or better left on the shelf? While earnings per share are shrinking, it's encouraging to see that at least Urban Edge Properties's dividend appears sustainable, with earnings and cashflow payout ratios that are within reasonable bounds. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.
Curious what other investors think of Urban Edge Properties? See what analysts 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.
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.
