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Is Sasseur Real Estate Investment Trust (SGX:CRPU) a good dividend stock? How can we tell? Dividend paying companies with growing earnings can be highly rewarding in the long term. If you are hoping to live on the income from dividends, it's important to be a lot more stringent with your investments than the average punter.
Some readers mightn't know much about Sasseur Real Estate Investment Trust's 8.3% dividend, as it has only been paying distributions for a year or so. When buying stocks for their dividends, you should always run through the checks below, to see if the dividend looks sustainable.
Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. So we need to form a view on if a company's dividend is sustainable, relative to its net profit after tax. Looking at the data, we can see that 16% of Sasseur Real Estate Investment Trust's profits were paid out as dividends in the last 12 months. We like this low payout ratio, because it implies the dividend is well covered and leaves ample opportunity for reinvestment.
We also measure dividends paid against a company's levered free cash flow, to see if enough cash was generated to cover the dividend. Sasseur Real Estate Investment Trust's cash payout ratio last year was 16%, which is quite low and suggests that the dividend was thoroughly covered by cash flow. 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.
We update our data on Sasseur Real Estate Investment Trust every 24 hours, so you can always get our latest analysis of its financial health, here.
One of the major risks of relying on dividend income, is the potential for a company to struggle financially and cut its dividend. Not only is your income cut, but the value of your investment declines as well - nasty. During the past one-year period, the first annual payment was S$0.061 in 2018, compared to S$0.066 last year. This works out to be a compound annual growth rate (CAGR) of approximately 8.6% a year over that time.
Sasseur Real Estate Investment Trust has been growing its dividend at a decent rate, and the payments have been stable despite the short payment history. This is a positive start.
Dividend Growth Potential
Examining whether the dividend is affordable and stable is important. However, it's also important to assess if earnings per share (EPS) are growing. Growing EPS can help maintain or increase the purchasing power of the dividend over the long run. Sasseur Real Estate Investment Trust's earnings per share are up 142% on last year. It's good to see earnings per share rising, but one year is too short a period to get excited about. Were this trend to continue, we'd be interested. Earnings per share have grown rapidly, and the company is retaining a majority of its earnings. We think this is ideal from an investment perspective, if the company is able to reinvest these earnings effectively. Any one year of performance can be misleading for a variety of reasons, so we wouldn't like to form any strong conclusions based on these numbers alone.
When we look at a dividend stock, we need to form a judgement on whether the dividend will grow, if the company is able to maintain it in a wide range of economic circumstances, and if the dividend payout is sustainable. First, we like that the company's dividend payments appear well covered, although the retained capital also needs to be effectively reinvested. We were also glad to see it growing earnings, although its dividend history is not as long as we'd like. Overall we think Sasseur Real Estate Investment Trust scores well on our analysis. It's not quite perfect, but we'd definitely be keen to take a closer look.
Earnings growth generally bodes well for the future value of company dividend payments. See if the 3 Sasseur Real Estate Investment Trust analysts we track are forecasting continued growth with our free report on analyst estimates for the company.
If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding above 3%.
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.