Q: I have a follow-up question to my Oct 26th question asking what are the 3 most important ratios to use when evaluating REITS. Your response to my initial question was "We would consider debt ratios (debt to value), with caution above 55%, cash flow to interest, with caution below 2X, and dividend payout ratio, with caution above 80%. Book value can be important but is often over or under-stated and needs to be looked at carefully. Valuation metrics (price/cash flow) are also important."
For NXR.un you calculated those ratios as NXR.UN 48%, 97.1%, 1.6X.
Is the Dividend Payout ratio calculated after the interest payment? If not, does that mean these companies are taking on debt to pay either the interest or dividend?
For NXR.un you calculated those ratios as NXR.UN 48%, 97.1%, 1.6X.
Is the Dividend Payout ratio calculated after the interest payment? If not, does that mean these companies are taking on debt to pay either the interest or dividend?
5i Research Answer:
Payout ratio is calculated either by comparing dividends to cash flow, or earnings. In both cases, it is after interest expenses.