Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Over the past 10 years, Investors Real Estate Trust (NYSE:IRET) has returned an average of 7.00% per year to shareholders in terms of dividend yield. Does Investors Real Estate Trust tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for Investors Real Estate Trust

5 questions I ask before picking a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

• Is its annual yield among the top 25% of dividend-paying companies?

• Has it paid dividend every year without dramatically reducing payout in the past?

• Has dividend per share amount increased over the past?

• Is its earnings sufficient to payout dividend at the current rate?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

How well does Investors Real Estate Trust fit our criteria?

The current payout ratio for IRET is negative, which means that it is loss-making, and paying its dividend from its retained earnings. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Not only have dividend payouts from Investors Real Estate Trust fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends. Compared to its peers, Investors Real Estate Trust has a yield of 5.88%, which is high for REITs stocks.

Next Steps:

After digging a little deeper into Investors Real Estate Trust’s yield, it’s easy to see why you should be cautious investing in the company just 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, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three important aspects you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for IRET’s future growth? Take a look at our free research report of analyst consensus for IRET’s outlook.

2. Valuation: What is IRET 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 IRET is currently mispriced by the market.

3. 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.