New England Realty Associates Limited Partnership (NYSEMKT:NEN) Is About To Go Ex-Dividend, And It Pays A 2.4% Yield

It looks like New England Realty Associates Limited Partnership (NYSEMKT:NEN) is about to go ex-dividend in the next 4 days. Investors can purchase shares before the 15th of March in order to be eligible for this dividend, which will be paid on the 31st of March.

New England Realty Associates Limited Partnership's next dividend payment will be US$0.32 per share, and in the last 12 months, the company paid a total of US$1.28 per share. Last year's total dividend payments show that New England Realty Associates Limited Partnership has a trailing yield of 2.4% on the current share price of $53.1123. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for New England Realty Associates Limited Partnership

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. Last year New England Realty Associates Limited Partnership paid out 109% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. 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 23% of its free cash flow as dividends last year, which is conservatively low.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and New England Realty Associates Limited Partnership fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

Click here to see how much of its profit New England Realty Associates Limited Partnership paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see New England Realty Associates Limited Partnership has grown its earnings rapidly, up 35% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. New England Realty Associates Limited Partnership has delivered 3.2% dividend growth per year on average over the past 10 years. 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

Has New England Realty Associates Limited Partnership got what it takes to maintain its dividend payments? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why New England Realty Associates Limited Partnership is paying out so much of its profit. In summary, while it has some positive characteristics, we're not inclined to race out and buy New England Realty Associates Limited Partnership today.

While it's tempting to invest in New England Realty Associates Limited Partnership for the dividends alone, you should always be mindful of the risks involved. We've identified 4 warning signs with New England Realty Associates Limited Partnership (at least 1 which is significant), and understanding them should be part of your investment process.

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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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. 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. Simply Wall St has no position in any stocks mentioned.
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