DDR Corp. (DDR), a real estate investment trust (:REIT), has recently increased its quarterly dividend by about 12.5% to 13.5 cents. The first quarter 2013 dividend is payable on April 2 to stockholders of record as of March 14.
This represents DDR’s fifth dividend increase since 2011. If the current dividend is maintained for the remainder of the year, the annualized dividend payout of the company would be 54 cents per share.
The dividend hike reflects continued strong performance by the company, backed by solid operating results and a diligent execution of its strategic plan. The company has followed a significant redevelopment program, disciplined acquisition policy and monetization of non-income producing assets.
Based on the closing price of $15.69 as on January 08, 2012, the proposed dividend affirms a yield of 3.44%. A steady dividend payout facilitates the long-term strategy of DDR to provide attractive risk-adjusted returns to its stockholders.
Solid dividend payouts are arguably the biggest enticement for REIT investors as the U.S. law requires these to distribute 90% of their annual taxable income in the form of dividends to the shareholders.
We are impressed with the company’s dedication towards continuously enhancing the shareholders’ value. DDR has long been minimizing the ground-up development spending in its domestic portfolio, and instead started allocating capital to the lease-up of existing projects. These redevelopments have created a growth opportunity for the company’s existing assets without the level of risk or capital required for new development. This in turn has enabled DDR to strengthen the balance sheet and generate considerable cash flow for portfolio reinvestment as well as increase the cash distribution to its shareholders.
The REIT industry has been experiencing many dividend hikes lately. Many of the DDR’s peers have recently hiked their quarterly dividend payouts. Host Hotels & Resorts, Inc. (HST) – the largest lodging REIT – increased its fourth-quarter dividend payout by 80% year over year to a quarterly payment of 9 cents per share or 36 cents on an annualized basis. Another Lodging REIT, RLJ Lodging Trust (RLJ), increased its quarterly dividend by 24.0% to 20.5 cents per share.
DDR is scheduled to release its fourth-quarter 2012 results on February 12, 2013. The Zacks Consensus Estimate for the fourth-quarter FFO (fund from operations) is currently pegged at 27 cents per share. The Earnings Surprise Prediction (ESP), which represents the difference between the most accurate estimate and the Zacks Consensus Estimate, for DDR is nil. Thus, we expect the company to report FFO in line with the Zacks Consensus Estimate.
DDR currently holds a Zacks Rank #3 (Hold). However, we maintain our long-term ‘Neutral’ recommendation on the stock.
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.
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