There’s A Lot To Like About Canadian Apartment Properties Real Estate Investment Trust’s (TSE:CAR.UN) Upcoming 0.2% Dividend

Canadian Apartment Properties Real Estate Investment Trust (TSE:CAR.UN) stock is about to trade ex-dividend in 4 days time. This means that investors who purchase shares on or after the 30th of July will not receive the dividend, which will be paid on the 15th of August.

Canadian Apartment Properties Real Estate Investment Trust’s next dividend payment will be CA$0.12 per share. Last year, in total, the company distributed CA$1.33 to shareholders. Calculating the last year’s worth of payments shows that Canadian Apartment Properties Real Estate Investment Trust has a trailing yield of 2.8% on the current share price of CA$48.96. 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! So we need to investigate whether Canadian Apartment Properties Real Estate Investment Trust can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Canadian Apartment Properties Real Estate Investment Trust

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. Canadian Apartment Properties Real Estate Investment Trust paid out a comfortable 47% of its profit last year. 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 flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 32% of its free cash flow as dividends, a comfortable payout level for most companies.

It’s positive to see that Canadian Apartment Properties 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.

Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

TSX:CAR.UN Historical Dividend Yield, July 25th 2019
TSX:CAR.UN Historical Dividend Yield, July 25th 2019

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That’s why it’s comforting to see Canadian Apartment Properties Real Estate Investment Trust’s earnings have been skyrocketing, up 28% per annum for the past five years. Canadian Apartment Properties Real Estate Investment Trust is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying 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 10 years, Canadian Apartment Properties Real Estate Investment Trust has increased its dividend at approximately 2.5% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Canadian Apartment Properties Real Estate Investment Trust is keeping back more of its profits to grow the business.

The Bottom Line

Is Canadian Apartment Properties Real Estate Investment Trust worth buying for its dividend? We love that Canadian Apartment Properties Real Estate Investment Trust is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There’s a lot to like about Canadian Apartment Properties Real Estate Investment Trust, and we would prioritise taking a closer look at it.

Curious what other investors think of Canadian Apartment Properties Real Estate Investment Trust? See what analysts 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 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.