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Alexandria (ARE) Pleases Investors With 5% Dividend Hike


Ushering in good news for shareholders, Alexandria Real Estate Equities ARE announced a 5% sequential hike in quarterly cash dividend. The company will now pay a dividend of 90 cents per share, up from 86 cents paid in the prior quarter. The increased dividend will be paid on Jan 15, 2018, to shareholders of record as on Dec 29, 2017.

Based on the increased rate, the annual dividend comes to $3.6 a share, resulting in an annualized yield of about 2.8%, considering Alexandria’s closing price of $129.03 on Dec 4. Though this is lower than the industry average of 3.97%, the hike will likely increase investors’ confidence in the stock.

In fact, solid dividend payouts are arguably the biggest enticement for real estate investment trusts (REIT) investors and Alexandria had earlier announced a 4% hike in second-quarter 2017 dividend. Notably, its dividend per share has witnessed a compound annual growth rate (CAGR) of 12.5% since first-quarter 2016. This reflects the company’s continued efforts to improve shareholder wealth.

Per management, the hike in dividend is in sync with the Pasadena, CA-based REIT’s strategy of sharing growth in cash flows from operating activities with the stockholders while also retaining a significant portion to reinvest in its strong development and redevelopment pipeline that consists of new Class A properties. Also, as of Sep 30, 2017, the funds from operations (FFO) payout ratio remained at 58%, which is a favorable level.

The company also announced fourth-quarter 2017 cash dividend of 43.75 cents for its 7% Series D Cumulative Convertible Preferred Stock. This dividend will also be paid on Jan 15, 2018, to shareholders on record as of Dec 29, 2017.

Encouragingly, year to date, shares of Alexandria have outperformed the industry. While the company’s shares have gained 16.1%, the industry has recorded growth of 6.6% during this period.

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

Some better-ranked stocks in the REIT space are Franklin Street Properties FSP, Columbia Property Trust CXP and MedEquities Realty Trust MRT. All three carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Franklin Street Properties’ FFO per share estimates for 2017 remained unchanged at $1.05 over the past month. Its share price has declined 7.9% in six months’ time.

Columbia Property Trust’s FFO per share estimates for the current year have moved up to $1.15 in a month’s time. Over the past six months, the company’s shares have gained 4.1%.

MedEquities Realty’s FFO per share estimates for 2017 increased to $1.12 over the same time frame. Year to date, its shares have gained 0.5%.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. 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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