Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. In the past 10 years UDR Inc (NYSE:UDR) has returned an average of 4.00% per year to investors in the form of dividend payouts. Let’s dig deeper into whether UDR should have a place in your portfolio. View our latest analysis for UDR
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Does earnings amply cover its dividend payments?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does UDR 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. The company currently pays out 192.78% of its earnings as a dividend, according to its trailing twelve-month data, meaning that a portion of dividend payments are funded by retained earnings. Furthermore, analysts are forecasting the payout ratio to exceed earnings going forward, leading to a future of uncertainty around the stability of UDR’s dividend income. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Not only have dividend payouts from UDR fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves. In terms of its peers, UDR generates a yield of 3.71%, which is on the low-side for REITs stocks.
Now you know to keep in mind the reason why investors should be careful investing in UDR 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. There are three important factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for UDR’s future growth? Take a look at our free research report of analyst consensus for UDR’s outlook.
- Valuation: What is UDR 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 UDR 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.