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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 Cousins Properties Incorporated (NYSE:CUZ) is about to trade ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 2nd of October will not receive the dividend, which will be paid on the 15th of October.
Cousins 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$1.2 per share to shareholders. Calculating the last year's worth of payments shows that Cousins Properties has a trailing yield of 3.1% on the current share price of $37.53. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Cousins 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. Fortunately Cousins Properties's payout ratio is modest, at just 44% of profit. That said, REITs are often required by law to distribute all of their earnings, and it's not unusual to see a REIT with a payout ratio around 100%. We wouldn't read too much into this. A useful secondary check can be to evaluate whether Cousins Properties generated enough free cash flow to afford its dividend. It paid out more than half (56%) of its free cash flow in the past year, which is within an average range for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Cousins Properties's earnings per share have dropped 28% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Cousins Properties has seen its dividend decline 12% per annum on average over the past ten years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.