{"id":9944,"date":"2025-02-10T11:56:01","date_gmt":"2025-02-10T11:56:01","guid":{"rendered":"https:\/\/finderica.com\/?p=9944"},"modified":"2025-02-10T11:56:01","modified_gmt":"2025-02-10T11:56:01","slug":"could-this-cannabis-stocks-16-yield-go-even-higher","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=9944","title":{"rendered":"Could This Cannabis Stock\u2019s 16% Yield Go Even Higher?"},"content":{"rendered":"
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Advanced Flower Capital<\/strong> (Nasdaq: AFCG) is a microcap mortgage real estate investment trust, or REIT, that focuses on the cannabis industry.<\/p>\n

The company pays a whopping 16% yield. While the debate rages on about whether marijuana is safe, let\u2019s see if we can settle whether Advanced Flower\u2019s dividend is safe or in danger of being cut.<\/p>\n

Advanced Flower\u2019s cash flow metric is called distributable earnings. In 2023, distributable earnings fell from $49.9 million to $41.4 million. However, distributable earnings for 2024 are forecast to come in at $69.3 million \u2013 a significant improvement.<\/p>\n

That should help the payout ratio, which has been a concern in the past. In 2023, the company paid out $42.5 million in dividends for a payout ratio of 103%. That means it paid out $1.03 in dividends for every $1 in distributable earnings.<\/p>\n

I\u2019m OK with REITs paying out up to 100% of their cash flow in dividends, as they are required by law to pay 90% or more of their earnings to shareholders. As a result, REITs tend to have higher payout ratios than other companies. But as long as they\u2019re not paying out more than they\u2019re bringing in, that\u2019s fine.<\/p>\n

Last year, Advanced Flower\u2019s payout ratio dropped to a more comfortable 83%.<\/p>\n

However, I\u2019m not so sure about the company\u2019s prospects for 2025. Revenue and net interest income are forecast to slip a bit, while earnings per share are expected to rise slightly. So I don\u2019t have a feel for where distributable earnings will be at the end of the year. They probably won\u2019t grow much, and I suspect they could be lower.<\/p>\n

Advanced Flower has paid a dividend since 2021, but in 2023, as distributable earnings fell, it lowered the dividend. The company also paid a $0.10 per share special dividend in 2024.<\/p>\n

<\/a>\"Chart:<\/a>
Given that the company may struggle to grow its distributable earnings in 2025 \u2013 and what that would mean for the payout ratio \u2013 plus the fact that it cut its dividend in the very recent past, Advanced Flower Capital\u2019s dividend cannot be considered safe.<\/p>\n

Dividend Safety Rating: D<\/strong><\/p>\n

\"Dividend<\/p>\n

What stock\u2019s dividend safety would you like me to analyze next? Leave the ticker in the comments section.<\/p>\n

You can also take a look to see whether we\u2019ve written about your favorite stock recently. Just click on the word \u201cSearch\u201d at the top right part of the Wealthy Retirement<\/em> homepage, type in the company name, and hit \u201cEnter.\u201d<\/p>\n

Also, keep in mind that Safety Net can analyze only individual stocks, not exchange-traded funds, mutual funds, or closed-end funds.<\/a><\/p>\n<\/p><\/div>\n