Arbor Realty Trust, Inc. (NYSE:ABR) stock is about to trade ex-dividend in 4 days time. This means that investors who purchase shares on or after the 14th of November will not receive the dividend, which will be paid on the 2nd of December.
Arbor Realty Trust’s next dividend payment will be US$0.3 per share, and in the last 12 months, the company paid a total of US$1.2 per share. Looking at the last 12 months of distributions, Arbor Realty Trust has a trailing yield of approximately 7.8% on its current stock price of $15.42. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it’s growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Its dividend payout ratio is 81% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth It could become a concern if earnings started to decline.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It’s encouraging to see Arbor Realty Trust has grown its earnings rapidly, up 29% a year for the past five years.
Arbor Realty Trust also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus – perpetually pushing a boulder uphill.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, eight years ago, Arbor Realty Trust has lifted its dividend by approximately 19% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Is Arbor Realty Trust worth buying for its dividend? Earnings per share are growing nicely, and Arbor Realty Trust is paying out a percentage of its earnings that is around the average for dividend-paying stocks. In summary, Arbor Realty Trust appears to have some promise as a dividend stock, and we’d suggest taking a closer look at it.
Wondering what the future holds for Arbor Realty Trust? See what the four 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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If you spot an error that warrants correction, please contact the editor at email@example.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.