Investors are always eager to hear that a stock in their portfolio has announced a dividend increase. For income investors, it means a monthly or quarterly raise. For investors who are also concerned with growth, such dividend hikes can portend an increase in future earnings. A dividend increase often indicates that the company’s board of directors has faith that future earnings can cover the dividend hike comfortably. In addition, a dividend increase often makes the stock more attractive to investors. Share price appreciation often follows dividend increases.
Take a look at three real estate investment trusts (REITs) that announced dividend hikes this week.
WP Carey Inc. (NYSE:WPC) is a New York City-based diversified net-lease REIT, whose single-tenant properties include industrial, warehouse, office, retail and self-storage units. It was founded in 1973 and recently celebrated its 50th year of investing in properties. WP Carey has traded on the New York Stock Exchange since 1998 and converted to a REIT in 2012.
WP Carey has 1,475 net leased properties with approximately 180 million square feet in 26 countries. Its portfolio includes 398 tenants from over 30 industries with an occupancy rate of 99%. One important consideration is that 99.1% of its property leases include rent escalators to buffer the inflationary environment prevalent today.
On Sept. 14, WP Carey announced it is increasing its quarterly dividend from $1.069 per share to $1.071 per share. The dividend is payable Oct. 16 to stockholders of record Sept. 29. The ex-dividend date is Sept. 28.
WP Carey has now raised its quarterly dividend for 99 consecutive quarters, dating back to 1999. The annual dividend of $4.28 yields 6.71% and the forward funds from operations (FFO) payout ratio is 81.2%. While the payout ratio is a little higher than investors would like to see, it’s still easily covering the dividend and has declined over the last few quarters.
WP Carey has raised its dividend by 4.48% over the past five years. Although the increases have been small, WP Carey remains a dependable source of quarterly income with an excellent yield.
Host Hotels & Resorts Inc. (NYSE:HST) is the largest lodging REIT and one of the largest owners of luxury and upper-upscale hotels. The company owns 72 properties in the United States and five properties internationally totaling approximately 41,900 rooms. It also holds noncontrolling interests in seven domestic and one international joint venture. Host Hotels is a member of the S&P 500.
On Sept. 14, Host Hotels & Resorts announced it had increased its quarterly dividend by 20%, from $0.15 to $0.18 per share. The dividend is payable on Oct. 16 to stockholders of record on Sept. 30. The ex-dividend date is Sept. 29.
The annualized dividend of $0.72 per share yields 4.428%
To its credit, Host Hotel’s board decided to raise the dividend 20% at a time when there was approximately $5 million lost in net income and hotel earnings before interest, taxes, depreciation and amortization (EBITDA) from its Maui Island hotels due to the fires on Maui, Hawaii. However, investors should note that over the past five years, Host Hotel’s dividends have fluctuated greatly, with six increases and four decreases during that time.
Realty Income Corp. (NYSE:O) is a San Diego-based, triple-net lease REIT, with over 13,100 properties around the world. The “Monthly Dividend Company,” as it’s widely known, is a member of the S&P 500 and an S&P 500 Dividend Aristocrat, with 639 consecutive monthly dividends paid and 122 dividend increases since 1994. Its portfolio occupancy rate is 99%.
Realty Income recently began to diversify its holdings by investing $950 million in Bellagio Las Vegas in a partnership with Blackstone. Under the terms of the agreement, Realty Income will own 95% of The Bellagio’s real estate assets, along with 21.9% indirect interest in the property and a yield-bearing preferred equity interest in the joint venture.
On Sept. 12, Realty Income announced it Increased its monthly dividend from $0.2555 to $0.2560, payable Oct. 13 to stockholders of record Oct. 2. The ex-dividend date is Sept. 29.
The annualized dividend of $3.072 per share yields 5.56%, which historically is somewhat high for Realty Income. Like WP Carey, Realty Income’s dividend hikes are usually in small increments, but add up year over year. The dividend has increased by 19.6% over the past five years.
After announcing the dividend hike, CEO Sumit Roy stated, “Core to Realty Income’s mission is providing our stockholders with dependable monthly dividends that increase over time.”
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