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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see BHG Retail REIT (SGX:BMGU) is about to trade ex-dividend in the next 3 days. Investors can purchase shares before the 6th of September in order to be eligible for this dividend, which will be paid on the 27th of September.
BHG Retail REIT's next dividend payment will be S$0.021 per share. Last year, in total, the company distributed S$0.052 to shareholders. Calculating the last year's worth of payments shows that BHG Retail REIT has a trailing yield of 7.4% on the current share price of SGD0.695. If you buy this business for its dividend, you should have an idea of whether BHG Retail REIT's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for BHG Retail REIT
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. BHG Retail REIT paid out 53% of its earnings to investors last year, a normal payout level for most businesses. While BHG Retail REIT 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 flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 53% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that BHG Retail REIT's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit BHG Retail REIT paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Earnings per share are basically flat over the past 12 months. Growth is a prerequisite for an outstanding dividend company over the long term, but we wouldn't read too much into flat numbers over any one year time frame.