Readers hoping to buy Dream Global Real Estate Investment Trust (TSE:DRG.UN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 30th of July in order to be eligible for this dividend, which will be paid on the 15th of August.
Dream Global Real Estate Investment Trust’s upcoming dividend is CA$0.067 a share, following on from the last 12 months, when the company distributed a total of CA$0.80 per share to shareholders. Based on the last year’s worth of payments, Dream Global Real Estate Investment Trust has a trailing yield of 5.7% on the current stock price of CA$14.13. 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.
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. Dream Global Real Estate Investment Trust paid out more than half (62%) of its earnings last year, which is a regular payout ratio for 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. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year, it paid out more than three-quarters (85%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It’s positive to see that Dream Global Real Estate Investment Trust’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?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It’s encouraging to see Dream Global Real Estate Investment Trust has grown its earnings rapidly, up 78% a year for the past five years.
We’d also point out that Dream Global Real Estate Investment Trust issued a meaningful number of new shares in the past year. 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. Dream Global Real Estate Investment Trust’s dividend payments are effectively flat on where they were eight years ago.
Is Dream Global Real Estate Investment Trust worth buying for its dividend? It’s good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That’s why we’re glad to see Dream Global Real Estate Investment Trust’s earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow – 62% and 85% respectively. All things considered, we are not particularly enthused about Dream Global Real Estate Investment Trust from a dividend perspective.
Wondering what the future holds for Dream Global Real Estate Investment Trust? See what the three analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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 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.