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Dividend Hike at Taubman Centers

Zacks Equity Research

Ushering in good news for its shareholders, retail real estate investment trust (:REIT) – Taubman Centers Inc. (TCO) – announced an 8% increase in its quarterly dividend rate. The company will now pay a dividend of 54 cents per share on its common stock, up from 50 cents paid in the prior quarter. The increased dividend will be paid on Mar 31, 2014 to shareholders of record on Mar 17.

Taubman has established an impressive track record of conservative capital management and cash returns to shareholders in the form of a steady dividend. It has never slashed its common dividend since it went public in 1992 and has in fact hiked its dividend 17 times since then. The new dividend rate results in an annualized yield of 3.1% based on the stock’s closing price of $69.82 on Mar 6.

With its solid portfolio of best-in-class retail malls, Taubman is well poised to improve its results in the quarters ahead. Strategic constructions and redevelopments at high-end markets are expected to be accretive to its top line going forward. The company exited the year 2013 with cash and cash equivalents of around $41.0 million, up from $32.1 million at year-end 2012.

Moreover, last month, Taubman came up with an impressive fourth-quarter earnings results, primarily driven by increase in rents, lowered interest expense, and the late 2012 purchase of an additional stake in International Plaza (Tampa, Fla.) and Waterside Shops (Naples, Fla.). As such, the company is well poised to maintain its growth curves and simultaneously benefit the shareholders with steadily rising dividends.

In addition to Taubman, a number of other REITs have raised their dividends in the recent months. Among them, Prologis Inc. (PLD) announced nearly an 18% increase in its quarterly dividend rate to 33 cents per share from 28 cents, while Simon Property Group Inc. (SPG) increased its quarterly dividend by over 4% to $1.25 per share from $1.20 paid in the prior quarter. Moreover, Avalonbay Communities Inc. (AVB) enhanced its quarterly dividend rate by over 8% to $1.16 per share from $1.07 per share paid 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.

Taubman currently carries a Zacks Rank #3 (Hold).

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