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Attention dividend hunters! Arena REIT (ASX:ARF) will be distributing its dividend of A$0.03 per share on the 10 May 2018, and will start trading ex-dividend in 2 days time on the 28 March 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Arena REIT’s most recent financial data to examine its dividend characteristics in more detail. View our latest analysis for Arena REIT
5 checks you should do on a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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Does it pay an annual yield higher than 75% of dividend payers?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has the amount of dividend per share grown over the past?
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Does earnings amply cover its dividend payments?
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Will the company be able to keep paying dividend based on the future earnings growth?
Does Arena REIT pass our checks?
Arena REIT has a trailing twelve-month payout ratio of 41.85%, 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 ARF’s payout to increase to 97.36% of its earnings, which leads to a dividend yield of 6.09%. However, EPS is forecasted to fall to A$0.17 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. This also brings about uncertainty around the sustainability of the payout ratio. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view Arena REIT as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. In terms of its peers, Arena REIT produces a yield of 5.74%, which is high for REITs stocks.
Next Steps:
Taking into account the dividend metrics, Arena REIT ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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. There are three relevant factors you should further research:
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Future Outlook: What are well-informed industry analysts predicting for ARF’s future growth? Take a look at our free research report of analyst consensus for ARF’s outlook.
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Valuation: What is ARF 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 ARF is currently mispriced by the market.
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Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.