It looks like Weingarten Realty Investors (NYSE:WRI) is about to go ex-dividend in the next 3 days. If you purchase the stock on or after the 5th of September, you won’t be eligible to receive this dividend, when it is paid on the 13th of September.
Weingarten Realty Investors’s next dividend payment will be US$0.40 per share, and in the last 12 months, the company paid a total of US$1.58 per share. Calculating the last year’s worth of payments shows that Weingarten Realty Investors has a trailing yield of 6.0% on the current share price of $26.49. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Weingarten Realty Investors has been able to grow its dividends, or if the dividend might be cut.
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. Weingarten Realty Investors paid out more than half (72%) 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 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. Over the last year it paid out 72% of its free cash flow as dividends, within the usual range for most companies.
It’s positive to see that Weingarten Realty Investors’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?
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 fall far enough, the company could be forced to cut its dividend. That’s why it’s comforting to see Weingarten Realty Investors’s earnings have been skyrocketing, up 34% per annum for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Weingarten Realty Investors could have strong prospects for future increases to the dividend.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Weingarten Realty Investors’s dividend payments per share have declined at 2.8% per year on average over the past ten years, which is uninspiring. It’s unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We’d hope it’s because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
The Bottom Line
Should investors buy Weingarten Realty Investors for the upcoming dividend? It’s good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we’d also note that Weingarten Realty Investors is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. In summary, while it has some positive characteristics, we’re not inclined to race out and buy Weingarten Realty Investors today.
Wondering what the future holds for Weingarten Realty Investors? See what the five 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.
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