Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Urstadt Biddle Properties Inc. (NYSE:UBA) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 3rd of October in order to receive the dividend, which the company will pay on the 18th of October.
Urstadt Biddle Properties's upcoming dividend is US$0.3 a share, following on from the last 12 months, when the company distributed a total of US$1.1 per share to shareholders. Last year's total dividend payments show that Urstadt Biddle Properties has a trailing yield of 4.6% on the current share price of $23.85. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Urstadt Biddle Properties
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. Urstadt Biddle Properties paid out 102% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. While Urstadt Biddle Properties 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. A useful secondary check can be to evaluate whether Urstadt Biddle Properties generated enough free cash flow to afford its dividend. It paid out 80% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
It's good to see that while Urstadt Biddle Properties's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Urstadt Biddle Properties's earnings per share have risen 16% per annum over the last five years.