How does the dividend payout compare to the previous quarter and is the payout ratio sustainable given the cash flow profile?
Answer
Below is a step‑by‑step assessment of the dividend‑payout question, using the information that is actually present in the press release and explaining what additional data would be needed for a full, quantitative comparison.
1. What the press release tells us
| Item (Q2 2025) | Source |
|---|---|
| Net income available to common shareholders | $1.78 per diluted share (for the three months ended June 30 2025 and June 30 2024) |
| Quarter‑end date | June 30 2025 |
| Company | Federal Realty Investment Trust (NYSE: FRT) |
| Sector | Real‑estate (REIT) – required to distribute ≥ 90 % of taxable earnings as dividends |
The release does not disclose:
- The actual dividend per share that was paid in Q2 2025.
- The dividend per share paid in the prior quarter (Q1 2025) or in Q2 2024.
- The cash‑flow statement (operating cash flow, free cash flow, or cash‑flow coverage of dividends).
Because the dividend amount and cash‑flow figures are missing, we cannot compute a precise payout ratio (dividend ÷ earnings or dividend ÷ cash flow) or directly compare the current payout to the previous quarter.
2. How to compare the dividend payout to the previous quarter (what you would need)
| Required Data | Why it matters |
|---|---|
| Dividend per share declared for Q2 2025 | This is the numerator for any payout‑ratio calculation. |
| Dividend per share declared for Q1 2025 (or the most recent prior quarter) | Allows a quarter‑over‑quarter change‑percentage calculation: Δ Dividend % = [(Div Q2 – Div Q1) / Div Q1] × 100. |
| Net income (or FFO – Funds from Operations) for each quarter | REITs often use Funds from Operations (FFO) rather than GAAP net income to gauge dividend sustainability, because REIT earnings are heavily influenced by property revaluations. |
| Operating cash flow / Free cash flow | Shows the actual cash available to fund the dividend, especially important for REITs that must meet a statutory 90 % distribution requirement. |
If those numbers were available, the analysis would look like this:
Calculate the dividend payout ratio – e.g.,
[
\text{Payout Ratio} = \frac{\text{Dividend per share}}{\text{Net income per share}} \times 100\%
]
or, more REIT‑focused,
[
\text{FFO Payout Ratio} = \frac{\text{Dividend per share}}{\text{FFO per share}} \times 100\%
]Compare Q2 2025 vs. Q1 2025 – a higher dividend with the same or lower earnings would raise the payout ratio, indicating a more aggressive distribution; a lower dividend would lower the ratio, suggesting a more conservative stance.
Assess sustainability – A sustainable payout ratio for a REIT typically stays below 90 % of FFO (or cash flow) because the 90 % statutory distribution rule forces the company to retain enough cash for capital expenditures, debt service, and liquidity. If the ratio is consistently near or above 100 % of net income, the REIT is likely using cash reserves or external financing to meet the dividend, which may not be sustainable over the long term.
3. General considerations for Federal Realty Investment Trust (FRT)
Even without the exact dividend numbers, we can outline the key factors that determine whether a dividend payout is sustainable for FRT:
| Factor | What to watch for |
|---|---|
| Cash‑flow generation (Operating cash flow / FFO) | REITs with strong, recurring lease payments and low vacancy rates generate steady cash. A decline in occupancy, rent concessions, or higher operating expenses can erode cash flow. |
| Capital‑expenditure (CapEx) needs | REITs must fund property acquisitions, renovations, and tenant improvements. If CapEx is rising faster than cash flow, the dividend may need to be trimmed. |
| Debt service | High interest‑coverage ratios or large principal repayments can constrain cash available for dividends. |
| Liquidity position | A healthy cash balance and a manageable debt maturity profile give the REIT flexibility to keep the dividend stable even if earnings dip temporarily. |
| Regulatory distribution requirement | As a REIT, FRT must distribute at least 90 % of its taxable earnings (or FFO). If cash flow falls below the required distribution, the company may have to dip into cash reserves or issue new debt, which can be a red flag for sustainability. |
4. What you can do next
Locate the dividend announcement – Federal Realty typically issues a separate “Dividend Declaration” press release (often on the same day as the earnings release). That document will list the quarterly dividend per share and the total cash outlay.
Pull the Q1 2025 earnings release – The prior quarter’s filing will contain the dividend amount for Q1 2025, enabling a direct comparison.
Review the cash‑flow statement – In the 10‑Q filing for the quarter ending June 30 2025, find the “Cash flows from operating activities” and “Cash flows from investing activities.” Subtract capital expenditures to estimate free cash flow.
Calculate the payout ratios – Using the dividend per share and either net income per share or FFO per share, compute the ratios and see whether they stay comfortably below the 90 % statutory threshold.
Check for any commentary on dividend policy – Management often discusses dividend sustainability in the “Management’s Discussion and Analysis” (MD&A) section of the 10‑Q. Look for statements about “maintaining a conservative payout ratio” or “preserving cash for growth initiatives.”
5. Bottom line (based on the data you have)
- We cannot definitively state whether the dividend payout is higher or lower than the previous quarter because the press release excerpt does not include the dividend amount for Q2 2025 or Q1 2025.
- Sustainability hinges on the relationship between the dividend and the REIT’s cash‑flow profile (operating cash flow/FFO). If the dividend is being funded primarily by cash flow and stays well under the 90 % distribution rule, it is likely sustainable. If the payout ratio is approaching or exceeding 100 % of earnings and cash flow is weakening, the dividend could be at risk unless the company has sizable cash reserves or is raising new capital.
Recommendation: Retrieve the missing dividend figures and cash‑flow data from Federal Realty’s 10‑Q filing (or the dedicated dividend press release) and run the simple ratio calculations outlined above. That will give you a concrete, quantitative answer to the “quarter‑over‑quarter dividend change” and the “sustainability of the payout ratio” for Q2 2025.