Shares of Ares Commercial Real Estate Corporation (NYSE:ACRE) will begin trading ex-dividend in 1 days. To qualify for the dividend check of US$0.28 per share, investors must have owned the shares prior to 28 June 2018, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Ares Commercial Real Estate’s latest financial data to analyse its dividend attributes. View out our latest analysis for Ares Commercial Real Estate
5 questions I ask before picking 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 it paid dividend every year without dramatically reducing payout in the past?
- Has it increased its dividend per share amount over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it have the ability to keep paying its dividends going forward?
How does Ares Commercial Real Estate fare?
REITs are a special-case dividend payer. This is because a high percentage of their earnings are required to be paid out as dividends. Ares Commercial Real Estate has a trailing twelve-month payout ratio of 93.32%, which is in-line with most other REIT stocks. In the near future, analysts are predicting a payout ratio of 95.65%, leading to a dividend yield of 8.17%. Moreover, EPS should increase to $1.25.
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. Unfortunately, it is really too early to view Ares Commercial Real Estate as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.Relative to peers, Ares Commercial Real Estate has a yield of 7.96%, which is on the low-side for Mortgage REITs stocks.
Now you know to keep in mind the reason why investors should be careful investing in Ares Commercial Real Estate for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three pertinent aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for ACRE’s future growth? Take a look at our free research report of analyst consensus for ACRE’s outlook.
- Valuation: What is ACRE 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 ACRE is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.