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Dividend Hike at Sovran Self Storage

Zacks Equity Research

Sovran Self Storage, Inc. (SSS) declared a 28.3% hike in its quarterly cash dividend rate. The company will now pay a dividend of 68 cents per share compared with 53 cents paid in the prior quarter. The increased dividend will be paid on Jan 27, 2014 to stockholders of record as of Jan 16, 2014.

The dividend hike at this Self storage real estate investment trust (:REIT) is based on its solid operating results over the last two years, improved outlook and an enhanced financial position.

Sovran Self Storage has made concerted efforts towards increasing shareholders wealth. Notably, this is the third dividend increase by the company in the past 12 months that has resulted in a total increase of more than 50% to shareholders.

After incorporating the new dividend, Sovran Self Storage’s total 2013 dividend came in at $2.72 per share. This reflects a 28.3% hike from the 2012 dividend. As a matter of fact, the new dividend rate results in an annualized yield of 4.18% based on the Sovran Self Storage’s closing price of $65.02 on Jan 6.

Sovran Self Storage came up with a better-than-expected result in the third quarter that was released in early November. The company reported third-quarter 2013 adjusted FFO of $1.01, ahead of the Zacks Consensus Estimate of 97 cents and the year-ago figure of 88 cents.

The results were aided by continued occupancy growth and higher net rental rates. Further, the company also increased it 2013 funds from operations (:FFO) per share outlook to the range of $3.77 to $3.79, from $3.70 to $3.74 forecasted earlier.

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.

Of late, many REITs have increased their quarterly dividend payouts. On Jan 6, DDR Corp. (DDR) hiked its first-quarter 2014 dividend by 14.8% to 15.5 cents per share from 13.5 cents paid in the prior quarter. Moreover, last month, a healthcare real estate investment trust (:REIT), Ventas Inc. (VTR), announced an 8.2% sequential hike in its quarterly cash dividend rate. 

Currently, Sovran Self Storage carries a Zacks Rank #2 (Buy). The other player in the REIT-Equity Trust–Other industry, which looks attractive at current levels includes Getty Realty Corp. (GTY) with a Zacks Rank #1 (Strong Buy).

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.

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