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Are these companies’ dividends unsustainable?

If there’s one thing that almost every investor in the sharemarket wants right now, it’s income. Capital growth is likely to remain subdued in the year ahead. The spectre of horribly volatile stock prices in recent years continues to haunt shareholders.

Naturally, then, no listed company in its right mind would be cutting dividends in this kind of environment – imagine the reception. But at the same time earnings are under pressure. Are CEOs paying out more dividends than they are earning, in the rush to give investors what they demand? If they are, unless earnings rebound soon, it’s possible that those payouts will be cut. You don’t want to be holding the stock when that happens.

Using the S&P/Capital IQ data base, we ran a simple screen over the All Ordinaries index to see which companies are paying out more than they are earning. There are 36 in all, as the table below shows – some are big names, and there are a lot of real estate investment trusts in there.

There could very well be a valid explanation. (See our follow up analysis here.) But if one of your stocks is in there, best have a look.

Company NameDividends per share ($)Basic EPS  ($)DPS/Basic EPSBasic EPS excl. XO ($)DPS/Basic EPS excl. XOCharter Hall Retail REIT (CQR)         0.261          0.032 816%         0.086 303%
Charter Hall Retail REIT (CQR)          0.261          0.032 816%          0.086 303%
Abacus Property Group (ABP)          0.165          0.021 786%          0.021 786%
Transurban Group (TCL)          0.295          0.038 776%          0.038 776%
IOOF Holdings (IFL)            0.37          0.084 440%          0.084 440%
Charter Hall Group (CHC)          0.182          0.049 371%          0.049 371%
DUET Group (DUE)            0.16          0.044 364%          0.044 364%
Ardent Leisure Group (AAD)          0.117          0.039 300%          0.039 300%
Toll Holdings (TOL)            0.25            0.09 278%            0.09 278%
Sydney Airport Holdings (SYD)            0.21          0.078 269%          0.089 236%
GPT Group (GPT)          0.366            0.14 261%          0.165 222%

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