U.S. Markets closed

EastGroup (EGP) Cheers Investors with 12.5% Dividend Hike

Zacks Equity Research
1 / 2
The Zacks Analyst Blog Highlights: Antero, Energen, Range Resources, Cimarex and Matador

Ushering in good news for its shareholders, EastGroup Properties EGP announced a 12.5% hike in the company's quarterly dividend rate to 72 cents per share from 64 cents paid earlier. The new dividend is scheduled to be paid on Oct 15, to shareholders of record as of Sep 28, 2018.

Based on the increased rate, the annual dividend comes to $2.88 per share, up from the previous annual rate of $2.56 per share. This leads to an annualized yield of 2.98%, considering this real estate investment trust’s (REIT) closing price of $96.49 on Sep 7.

Solid dividend payouts remain arguably the biggest enticement for REIT investors and quite encouragingly, EastGroup Properties remains committed to boosting shareholder wealth. The company has been consistently enhancing shareholder wealth through dividend payouts. For 26 consecutive years, this REIT has increased or maintained its dividend and has, in fact, raised it for 23 years, over the same period. Also, notably, the company has hiked its dividend in each of the last seven years.

EastGroup Properties has solid fundamentals to back its dividend hikes. In fact, the company has been a decent performer, beating the Zacks Consensus Estimate in three of the past four quarters, on funds from operations (FFO) per share basis, coming up with an average positive surprise of 2.5%. Moreover, EastGroup Properties’ return on equity (ROE) is 10.26%, significantly higher than the industry’s ROE of 4.88 %.

Also, this industrial REIT, which is focused on the development, acquisition and operation of industrial properties in major Sunbelt markets throughout the United States, churns cash flow per share of $4.85 as compared to the industry average of $ 1.91. Its projected sales growth of 8.36% is above the industry average of 4.26%.

Further, the company has witnessed decent growth in FFO per share in the past, and its projected FFO per share growth rate of 8.36% is ahead of the industry average of 2.82%. This will likely help the company sustain its dividend payout to equity investors.  

In addition, fundamentals of the industrial real estate market remain robust. Particularly, demand for modern distribution facilities has been getting a significant boost as companies are compelled to enhance, and renovate their distribution and production platforms to support e-commerce business, address a large customer base and urbanization. Services like same-day delivery are gaining traction and last-mile properties are witnessing a solid increase in asset values.

These have helped the industrial REITs scale new heights. Per a study by the commercial real estate services firm — CBRE Group Inc. CBRE — availability rate for the U.S. industrial real estate market in Q2 shrunk 10 basis points (bps) to 7.2%, denoting the lowest level since Q4 2000. Additionally, with demand surpassing new supply, net asking rents inched up 1.7% in Q2 to $7.11 per square feet — marking the highest level since 1989.

Particularly, with a recovering economy and job market gains, as well as tax reforms, consumption levels are anticipated to remain elevated. And with a healthy manufacturing environment and high business inventories, demand for warehouse and logistics real estate is anticipated to be high, giving significant impetus to industrial REITs like Prologis Inc. PLD, Duke Realty Corp. DRE and EastGroup Properties.

Furthermore, as investors prefer an income-generating stock, a high dividend-yielding one is obviously much coveted. Needless to say, investors are always on the lookout for companies with a track record of consistent and incremental dividend payments to put their money on.

EastGroup Properties currently has a Zacks Rank #3 (Hold). Shares of this company have outperformed the industry it belongs to, in the past six months. Its shares have rallied 14.4%, while the industry recorded growth of 6.6% during this time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>