3 REITS With Upcoming Earnings Reports That Just Raised Dividends

Investors looking for an edge with stocks that have upcoming earnings reports may want to consider those companies that have recently increased their quarterly dividend payout.

A May 2020 study done by Ham, Kaplan and Leary in the Journal of Financial Economics reviewed several previous studies to determine whether companies that raise their quarterly dividends are signaling improved earnings reports in the future.

“We show evidence that dividend changes do in fact convey information about future economic income that persists for at least three years, suggesting that dividend increasing (decreasing) firms move to a new and higher (lower) level of permanent earnings,” according to the study.

This makes sense because it would be unlikely that a company with diminishing earnings would be able to pay out more in dividends without depleting its cash flow and severely enlarging its payout ratio. But a company with improving earnings could pay out more and still have sufficient capital for debt repayment or stock buybacks.

When a company announces a dividend increase just prior to its earnings announcement, it’s a possible tip-off to Wall Street of improving metrics, and it could be about to beat analyst estimates and perhaps its year-over-year results. It could also mean the company will announce an increase in its forward guidance. Positive announcements like these frequently send share prices higher.

Within the last few weeks, four real estate investment trusts (REITs) have raised their quarterly dividends. One of them, Tanger Factory Outlet Centers Inc. SKT, increased its quarterly dividend by 11.3% on April 11 from $0.88 to $0.98 per share.

On April 27, after the market closed, Tanger reported first-quarter operating results. Not only did Tanger beat the analysts’ estimates on funds from operations (FFO) and revenue, but it also raised its full-year 2023 guidance for core FFO per share. The next morning, Tanger shares shot higher and finished the day up 6.92%.

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That opportunity may have passed, but there are more still out there. Take a look at three other REITs that have recently raised their dividends and have earning reports this week.

Agree Realty Corp. ADC is a net-lease REIT that focuses on retail properties. Its portfolio includes 1,839 properties totaling 38 million square feet.

On April 7, Agree Realty announced an increase in its monthly dividend from $0.24 to $0.243 per share. That raises the annual dividend from $2.88 to $2.916, with a yield of 4.28% and an FFO payout ratio of 73.7%.

Agree Realty will announce its first-quarter operating results after the market closes on May 4.

Summit Hotel Properties Inc. INN is an Austin, Texas-based hotel REIT with 103 properties in 24 states.

On April 27, Summit Hotel announced it will raise its quarterly dividend by 50%, from $0.04 to $0.06 per share. That boosted the annual dividend from $0.16 to $0.24, for a yield of 3.74%. With forward FFO of $0.98, that creates an annual FFO payout ratio of 24.2%.

Summit Hotel Properties will announce its first-quarter operating results after the market closes on May 3.

Community Healthcare Trust Inc. CHCT is a Franklin, Tennessee-based healthcare REIT that owns 161 properties across 34 states. Its diverse portfolio includes medical office buildings, specialty centers, behavioral facilities and inpatient rehabilitation centers.

On April 28, Community Healthcare Trust announced an increase in its quarterly dividend from $0.448 to $0.45 per share, payable on May 26 to shareholders of record on May 12. The annual dividend of $1.80 yields 5%, and the FFO payout ratio is now 75.9%.

Community Healthcare Trust will announce its first quarter operating results after the market closes on May 2.

Although there is evidence to suggest that dividend increases portend improvements in earnings, investors should perform due diligence on all REITs they’re considering for purchase, and not rely on just one factor, such as an increase in the dividend.

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