Alexandria Real Estate Equities Inc. (ARE) announced a 5% hike in its quarterly cash dividend rate, reflecting a dividend increase for the sixth consecutive quarter. This real estate investment trust (:REIT) will now pay a dividend of 68 cents per share for third-quarter 2013, up 3 cents from the prior-quarter dividend. The increased dividend will be paid on Oct 15, 2013 to stockholders of record on Sep 30.
Alexandria Real Estate has a consistent track record of increasing shareholders' wealth. With the latest dividend hike, the company has achieved a 15 cents or 28% year-over-year increase. Most recently, the company hiked its dividend by 8% to 65 cents in the prior quarter.
With low funds from operations (:FFO) payout ratio of 65% as of Jun 30, 2013, the company has adequate room to enhance its dividend rate going forward. Hence, we remain encouraged.
Moreover, the announced quarterly dividend rate at this REIT equates to an annualized rate of common stock dividend of $2.72 per share, resulting in a yield of nearly 4.30% based on the closing price of Alexandria Real Estate’s stock on Sep 9.
As of Jun 30, 2013, Alexandria Real Estate had cash and cash equivalents worth $302.2 million, up from $87.0 million as of Mar 31, 2013. We believe that the Pasadena, Calif.-based Alexandria Real Estate – major owner and leading life science real estate company – has adequate cash to provide optimum shareholder value.
As a matter of fact, solid dividend payouts are arguably the biggest attraction for REIT investors as the U.S. law requires these companies to distribute 90% of their annual taxable income in the form of dividends to shareholders.
The other REIT - EastGroup Properties Inc. (EGP) – has recently announced a hike in its quarterly cash dividend sequentially by 1.9% to 54 cents per share from 53 cents. The new dividend will be paid on Sep 30, 2013 to shareholders of record as of Sep 19, 2013. Notably, EastGroup has raised or maintained its dividend for 21 consecutive years and hiked it for 18 years within this period.
Alexandria currently has a Zacks Rank #3 (Hold). However, two other REITs that are performing well and deserve a look are CubeSmart (CUBE) and Highwoods Properties Inc. (HIW), both carrying a Zacks Rank #2 (Buy).
Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.