3 REITS With The Best Dividend Growth Rates Over The Past 5 Years
If you’re an income investor, chances are good that you love having dividend stocks in your portfolio with dividends that grow precipitously over time. But not all dividend stocks have substantial dividend growth. It takes ongoing earnings growth to enable a company to continue raising its dividend without running into difficulty paying its shareholders.
Take a look at three real estate investment trusts (REITs) that have had superb dividend growth over the past five years, putting them well ahead of other REITs in that regard:
CTO Realty Growth Inc. (NYSE: CTO) is a Daytona Beach, Florida-based diversified REIT that owns and operates 23 retail, office and mixed-use properties. Of the 23 properties, 15 are multitenant and eight are single tenant. Its leased occupancy rate as of March 31 was 93.5%.
In August 2018, CTO Realty paid a nominal quarterly dividend of only $0.016 per share. But over the next 10 quarters, it raised its dividend eight times reaching $0.3943 by March 2021. CTO Realty then cut the dividend to $0.333 but has raised it three times since then to its present amount of $0.38 per share. That’s a 2,364% increase in less than five years.
On April 27, CTO Realty reported its first-quarter operating expenses. Funds from operations (FFO) of $0.43 per share was well up from $0.16 in the first quarter of 2022. Revenue of $24.72 million was 42.62% higher than revenue of $17.21 million in the first quarter of 2022.
While that’s impressive growth in both earnings and dividends, one caveat now is that CTO Realty’s Core FFO 2023 guidance range is $1.50 to $1.55. The $1.52 annual dividend gives CTO Realty an FFO payout ratio close to 100%. In a best-case scenario, it probably won’t hike dividends again anytime soon, and in a worst-case scenario, another dividend cut is possible should FFO diminish over future quarters.
For the moment, the excellent first-quarter results and 9.5% dividend yield are both positives for CTO Realty going forward.
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Innovative Industrial Properties Inc. (NYSE: IIPR) is a Park City, Utah-based diversified/industrial REIT that specializes in triple-net leases and lease-backs on commercial properties with cannabis companies as its sole tenants.
As of Dec. 31, 2022, Innovative Industrial Properties owned 110 properties across 19 states. Its average lease length is 15.5 years. Its property mix is 91% industrial, 3% retail and 6% industrial/retail.
Five years ago, Innovative Industrial paid a quarterly dividend of $0.25 per share. But since then, the dividend has increased 13 times and is up to $1.80 per share. That’s an increase of 620% in five years.
There is one caveat with Innovative Industrial — the stock is quite volatile. Over the past five years, the stock has risen from $26 to $263 before falling to its present level near $68. Innovative Industrial has a dividend yield of 10.62% and a payout ratio of 88.4%. Although this REIT has done extraordinarily well, the volatility may not be well-suited for more conservative income investors.
American Homes 4 Rent (NYSE: AMH) is a Calabasas, California-based residential REIT focused on purchasing, developing, renovating and leasing both used and new single-family homes as rental properties. American Homes 4 Rent began in 2012 and in 11 years built a portfolio of 57,878 single-family units across 21 states. Its largest concentration of homes is in the Southeastern U.S., where population growth has been explosive. Its initial public offering (IPO) was in July 2013.
Since May 2018, American Homes 4 Rent has increased its dividend three times, from an initial $0.05 to the present $0.22 per share. That’s a 340% increase in five years without any suspensions or cuts — even during the worst of the COVID-19 pandemic.
On May 4, American Homes 4 Rent presented its first-quarter operating results. FFO of $0.41 per share beat the estimates by a penny and was a 7.89% increase over FFO of $0.38 in the first quarter of 2022. Revenue of $397.7 million beat the consensus estimate of $390.57 million and was an 11.68% increase over revenue of $356.11 million in the first quarter of 2022.
The annual dividend of $0.88 per share is well covered with a 55% FFO payout ratio. Although American Homes 4 Rent’s dividend yield is only 2.66%, its dividend growth and earnings continue to be impressive.
Over the past five years, private market real estate investments have outperformed the publicly traded REIT market by about 50%. Check out Benzinga’s Real Estate Offering Screener to discover the latest passive real estate investments.
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