Investors are always happy when a company they own increases its dividend. After all, as an income investor, you just received a raise.
But the hikes often mean more than just a company being generous. Dividend increases can also be an indication that the company feels its future earnings will be sufficient to cover the increase being given to its shareholders.
This is especially true with real estate investment trusts (REITs) that are mandated by law to pay out a minimum of 90% of their taxable income in the form of dividends to shareholders. A dividend hike can be an indirect way of letting shareholders know its taxable income may soon increase.
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Take a look at three REITs that announced dividend hikes this week:
Essential Properties Realty Trust Inc. EPRT is a Princeton, New Jersey-based diversified REIT that owns and manages single-tenant properties with net leases for service-oriented and experience-based businesses. Essential Properties was founded in 2016 and has a market cap of $3.68 billion. It has a portfolio of 1,688 properties across 48 states. Its properties have an occupancy rate of 99.8%.
On April 26, Essential Properties announced its first-quarter operating results. Adjusted funds from operations (AFFO) of $0.40 was in line with estimates. Revenue of $83.69 million beat the estimates by $4.63 million and was 19.4% above the revenue in the first quarter of 2022. In addition, Essential Properties raised its previous 2023 AFFO guidance from a range of $1.58-$1.64 to $1.60-$1.64 per share.
On June 12, Essential Properties also announced an increase in its quarterly dividend from $0.275 to $0.28 per share. The dividend is payable on July 14 to stockholders of record as of June 30. The annual dividend of $1.12 per share yields 4.57%. The payout ratio is a moderate 66%.
Realty Income Corp. O is a San Diego-based, triple-net lease retail REIT, with over 12,400 properties around the world. The “Monthly Dividend Company”, as it is widely known, is a member of the S&P 500 and an S&P 500 Dividend Aristocrat, with 635 consecutive monthly dividends paid and 121 dividend increases since 1994. It is one of the more popular REITs among investors today.
Funds from operations (FFO) of $1.04 per share beat both the estimates and FFO of the first quarter of 2022 by $0.03 per share. Revenue of $944.39 million beat the estimates by $61.31 million and was 17% better than its revenue of $643.26 million in the first quarter of 2022.
Realty Income also raised its full-year 2023 guidance for FFO per share from $4.01-$4.03 to $4.05-$4.15 and said it ended the first quarter with a 99% occupancy rate. Numbers like that are why Realty Income is able to raise its dividend so frequently.
On June 13, Realty Income announced an increase in its monthly dividend from $0.255 to $0.2555 per share. The forward yield is now 5.01%. The dividend is payable on July 14 for shareholders of record on July 3. The ex-dividend date is June 30.
Host Hotels & Resorts Inc. HST is a Bethesda, Maryland hotel REIT that calls itself “the world’s largest lodging REIT.” It’s an S&P 500 company that owns and operates 41,900 rooms in 77 hotels in 20 of the largest markets across the U.S. and another five hotels in Canada and Brazil. It was formed in 1993 and has a market capitalization rate of $11.9 billion.
Most of Host Hotels’ properties are upscale and luxury hotels in central business districts that are conveniently located near airports. The hotels generally include amenities such as restaurants and lounges, swimming pools, exercise facilities and gift shops. Of its 78 hotels, 28 contain over 500 rooms.
On May 3, Host Hotels & Resorts announced its first-quarter operating results. FFO of $0.54 beat the estimate by $0.06 and was 41.03% above earnings of $0.39 per share in the first quarter of 2022. Revenue of $1.38 billion beat the estimate of $1.31 billion and was 28.58% higher than revenue of $1.07 billion in the first quarter of 2022.
On the heels of its improved earnings, on June 14 Host Hotels & Resorts announced a 25% increase in its second-quarter dividend from $0.12 to $0.15 per share. The forward annual dividend of $0.60 now yields 3.43%, and the payout ratio from funds from operations is still a very reasonable 31.4%.
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