Apartment Investment and Management Company (AIV) – an apartment real estate investment trust (:REIT) better known as Aimco – announced an 8.3% hike in its quarterly dividend rate. The company will now pay a dividend of 26 cents per share of Class A Common Stock compared with 24 cents paid in the prior quarter. The increased dividend will be paid on Feb 28, 2014 to stockholders of record on Feb 14.
Following this announcement on Jan 29, shares of Aimco moved up nearly 2% to $27.83 during the regular trading session on the NYSE. The new dividend rate results in an annualized yield of 3.7% based on the company’s closing price of $27.83 on Jan 30. The company had last hiked its dividend a year ago. Undoubtedly, a steady dividend payout facilitates the long-term strategy of Aimco to provide attractive risk-adjusted returns to its stockholders.
The dividend hike reflects a decent performance and meticulous execution of strategic plans at Aimco. It has solid portfolio of quality apartment communities in key markets in the U.S. Additionally, the rise in demand for apartment properties driven by the ‘echo boomers’ – children of the baby boomer generation – keeps us positive on the stock.
In December, Aimco disclosed the collection of $230 million associated with the West Harlem property loan deal. This has helped Aimco to significantly improve its balance sheet as it utilized the proceeds to pay off its outstanding debt on the revolving credit line. At the end of the third quarter of 2013, Aimco had cash on hand of $183.3 million and available borrowing capacity on its revolving credit facility of $255.6 million.
A number of REIT stocks have also raised their dividend in recent times. Among them, HCP Inc. (HCP) announced a 3.8% hike in its quarterly cash dividend rate to 54.5 cents per share while AvalonBay Communities, Inc. (AVB) raised it by about 8.4% sequentially to $1.16 per share. Furthermore, Cousins Properties Inc. (CUZ) hiked its quarterly cash dividend by 67% sequentially to 7.5 cents per share.
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 the shareholders.
Aimco is scheduled to release its fourth-quarter 2014 results after the market close on Feb 6. The Zacks Consensus Estimate for fourth-quarter 2014 funds from operations (:FFO) is currently pegged at 56 cents per share.
The company’s Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at 0.00%. This along with the Zacks Rank #3 makes surprise prediction difficult.
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.