Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see British Land Company Plc (LON:BLND) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 3rd of October to receive the dividend, which will be paid on the 8th of November.
British Land's next dividend payment will be UK£0.08 per share. Last year, in total, the company distributed UK£0.3 to shareholders. Last year's total dividend payments show that British Land has a trailing yield of 5.5% on the current share price of £5.816. 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.
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. British Land paid out a comfortable 49% of its profit last year. 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. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Fortunately, it paid out only 49% of its free cash flow in the past year.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. British Land was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. British Land's dividend payments per share have declined at 1.6% per year on average over the past ten years, which is uninspiring.
We update our analysis on British Land every 24 hours, so you can always get the latest insights on its financial health, here.
To Sum It Up
From a dividend perspective, should investors buy or avoid British Land? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.
Wondering what the future holds for British Land? See what the ten analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.