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We Wouldn't Be Too Quick To Buy Standard Life Investments Property Income Trust Limited (LON:SLI) Before It Goes Ex-Dividend

Simply Wall St

It looks like Standard Life Investments Property Income Trust Limited (LON:SLI) is about to go ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 15th of August will not receive this dividend, which will be paid on the 30th of August.

Standard Life Investments Property Income Trust's next dividend payment will be UK£0.012 per share, and in the last 12 months, the company paid a total of UK£0.048 per share. Based on the last year's worth of payments, Standard Life Investments Property Income Trust has a trailing yield of 5.4% on the current stock price of £0.888. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Standard Life Investments Property Income Trust

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Standard Life Investments Property Income Trust is paying out an acceptable 51% 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 Standard Life Investments Property Income Trust generated enough free cash flow to afford its dividend. Dividends consumed 51% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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 how much of its profit Standard Life Investments Property Income Trust paid out over the last 12 months.

LSE:SLI Historical Dividend Yield, August 11th 2019

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Standard Life Investments Property Income Trust's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Standard Life Investments Property Income Trust has delivered an average of 1.8% per year annual increase in its dividend, based on the past 10 years of dividend payments.

The Bottom Line

Should investors buy Standard Life Investments Property Income Trust for the upcoming dividend? Standard Life Investments Property Income Trust has been unable to generate earnings growth, but at least its dividend looks sustainable, with its profit and cashflow payout ratios within reasonable limits. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Standard Life Investments Property Income Trust.

Keen to explore more data on Standard Life Investments Property Income Trust's financial performance? Check out our visualisation of its historical revenue and earnings growth.

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 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.