Readers hoping to buy New England Realty Associates Limited Partnership (NYSEMKT:NEN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 13th of March, you won’t be eligible to receive this dividend, when it is paid on the 31st of March.
New England Realty Associates Limited Partnership’s next dividend payment will be US$0.32 per share. Last year, in total, the company distributed US$1.28 to shareholders. Based on the last year’s worth of payments, New England Realty Associates Limited Partnership has a trailing yield of 2.2% on the current stock price of $58.5. If you buy this business for its dividend, you should have an idea of whether New England Realty Associates Limited Partnership’s dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it’s growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. New England Realty Associates Limited Partnership paid out 75% of its earnings to investors last year, a normal payout level for most businesses. 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. It paid out 22% of its free cash flow as dividends last year, which is conservatively low.
It’s positive to see that New England Realty Associates Limited Partnership’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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. That’s why it’s comforting to see New England Realty Associates Limited Partnership’s earnings have been skyrocketing, up 27% per annum for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. With a reasonable payout ratio, profits being reinvested, and some earnings growth, New England Realty Associates Limited Partnership could have strong prospects for future increases to the dividend.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the past ten years, New England Realty Associates Limited Partnership has increased its dividend at approximately 3.2% a year on average. Earnings per share have been growing much quicker than dividends, potentially because New England Realty Associates Limited Partnership is keeping back more of its profits to grow the business.
To Sum It Up
Is New England Realty Associates Limited Partnership an attractive dividend stock, or better left on the shelf? New England Realty Associates Limited Partnership’s growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. There’s a lot to like about New England Realty Associates Limited Partnership, and we would prioritise taking a closer look at it.
So while New England Realty Associates Limited Partnership looks good from a dividend perspective, it’s always worthwhile being up to date with the risks involved in this stock. We’ve identified 2 warning signs with New England Realty Associates Limited Partnership (at least 1 which is significant), and understanding them should be part of your investment process.
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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