Should You Buy Secure Income REIT Plc (LON:SIR) For Its Dividend?

A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Secure Income REIT Plc (AIM:SIR) has returned to shareholders over the past 2 years, an average dividend yield of 4.00% annually. Let's dig deeper into whether Secure Income REIT should have a place in your portfolio. Check out our latest analysis for Secure Income REIT

5 checks you should do on a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• Is its annual yield among the top 25% of dividend-paying companies?
• Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
• Has it increased its dividend per share amount over the past?
• Is is able to pay the current rate of dividends from its earnings?
• Will the company be able to keep paying dividend based on the future earnings growth?

How does Secure Income REIT fare?

The company currently pays out 16.63% of its earnings as a dividend, according to its trailing twelve-month data, which is rather low compared to other REITs. Generally, REITs are expected to pay out the majority of its earnings to provide a regular income stream for their investors. Going forward, analysts expect SIR's payout to increase to 100.24% of its earnings, which leads to a dividend yield of around 4.14%. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Secure Income REIT as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Compared to its peers, Secure Income REIT produces a yield of 3.21%, which is on the low-side for REITs stocks.

Next Steps:

After digging a little deeper into Secure Income REIT's yield, it's easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I've put together three fundamental factors you should look at:

1. Valuation: What is SIR worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether SIR is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Secure Income REIT’s board and the CEO’s back ground.
3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.