Is It Smart To Buy CT Real Estate Investment Trust (TSE:CRT.UN) Before It Goes Ex-Dividend?

Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that CT Real Estate Investment Trust (TSE:CRT.UN) is about to go ex-dividend in just 4 days. 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.

CT Real Estate Investment Trust’s next dividend payment will be CA$0.063 per share. Last year, in total, the company distributed CA$0.76 to shareholders. Calculating the last year’s worth of payments shows that CT Real Estate Investment Trust has a trailing yield of 5.2% on the current share price of CA$14.58. If you buy this business for its dividend, you should have an idea of whether CT Real Estate Investment Trust’s dividend is reliable and sustainable. So we need to investigate whether CT Real Estate Investment Trust can afford its dividend, and if the dividend could grow.

Check out our latest analysis for CT Real Estate Investment Trust

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately CT Real Estate Investment Trust’s payout ratio is modest, at just 25% of profit. While CT Real Estate Investment Trust seems to be paying out a very high percentage of its income, REITs have different dividend payment behaviour and so, while we don’t think this is great, we also don’t think it is unusual. 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 paid out 19% of its free cash flow as dividends last year, which is conservatively low.

It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.

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

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

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 CT Real Estate Investment Trust’s earnings have been skyrocketing, up 28% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. 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 6 years, CT Real Estate Investment Trust has increased its dividend at approximately 2.6% a year on average. It’s good to see both earnings and the dividend have improved – although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

Is CT Real Estate Investment Trust worth buying for its dividend? CT Real Estate Investment Trust has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It’s a promising combination that should mark this company worthy of closer attention.

Ever wonder what the future holds for CT 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

If you’re in the market for dividend stocks, we recommend checking our list of top 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.