Weingarten Realty Investors (NYSE:WRI) stock is about to trade ex-dividend in 3 days time. If you purchase the stock on or after the 5th of September, you won't be eligible to receive this dividend, when it is paid on the 13th of September.
Weingarten Realty Investors's next dividend payment will be US$0.40 per share, and in the last 12 months, the company paid a total of US$1.58 per share. Looking at the last 12 months of distributions, Weingarten Realty Investors has a trailing yield of approximately 6.0% on its current stock price of $26.49. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Weingarten Realty Investors can afford its dividend, and if the dividend could grow.
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. Weingarten Realty Investors is paying out an acceptable 72% 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. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Dividends consumed 72% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that Weingarten Realty Investors'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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Weingarten Realty Investors's earnings have been skyrocketing, up 34% per annum for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Weingarten Realty Investors has seen its dividend decline 2.8% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
To Sum It Up
Has Weingarten Realty Investors got what it takes to maintain its dividend payments? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that Weingarten Realty Investors is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.
Wondering what the future holds for Weingarten Realty Investors? See what the five 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.
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