Taubman Centers, Inc. TCO recently announced rewards for its shareholders in the form of a 3.1% sequential hike in the quarterly dividend rate on common stock. In fact, the quarterly dividend of 67.5 cents comes in higher than the previously-announced figure of 65.5 cents. The new dividend will be paid on Mar 29 to shareholders of record as of Mar 15, 2019.
Based on the increased rate, the annual dividend stands at $2.70 per share, up from the prior annual rate of $2.62, leading to an annualized yield of 5.2%, considering Taubman’s closing price of $51.6 on Mar 4.
Solid dividend payouts are arguably the biggest enticement for real estate investment trust (REIT) investors, and Taubman remains committed toward boosting shareholder wealth. In fact, the company has never slashed its common dividend since it went public in 1992. On the contrary, it has hiked dividends 22 times since 1996. Such shareholder-friendly move boosts investors’ confidence in the stock.
The latest hike reflects Taubman’s ability to generate solid cash flow growth through its operating platform and high quality portfolio. With a strong current cash flow growth rate of 6.35%, the increased dividend is likely to be sustainable. Additionally, presence of dominant retail malls inregions with high average sales productivity and high-quality roster of national retailersensures a steady source of rental revenues for the retail landlord.
In fact, the company recently reported the 10th consecutive quarter of positive sales growth in fourth-quarter 2018. Further, average rent per square foot for its comparable centers improved 3.3% year over year to $57.76. Moreover, comparable center mall tenant sales per square foot were up 10.1% year over year in the reported quarter. These have driven organic growth for the company in the recently-reported quarter.
However, mall traffic continues to suffer amid rapid shift in customers’ shopping preferences and patterns, with online purchases growing by leaps and bounds. These have made retailers reconsider their footprint and eventually opt for store closures. In addition, retailers unable to cope with competition are filing bankruptcies. This has emerged as a pressing concern for retail REITs like Kimco Realty Corp. KIM, The Macerich Company MAC, SITE Centers Corp. SITC and Taubman, as the trend is bringing down demand for the retail real estate space considerably.
This has led to tenants demanding substantial lease concessions, impacting Taubman’s operating performance. This might drag the company’s bottom-line results, hindering its ability to pay high dividends.
Taubman currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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