Alexandria Rewards Investors With 3% Sequential Dividend Hike

Alexandria Real Estate Equities (NYSE:ARE) recently announced a 3% sequential hike in fourth-quarter 2019 cash dividend. The company will now pay a dividend of $1.03 per share, up from the $1 paid for the third quarter. The increased dividend will be paid on Jan 15, 2020, to shareholders of record as on Dec 31, 2019.

Based on the increased rate, the annual dividend comes to $4.12 a share, resulting in an annualized yield of about 2.5%, considering Alexandria’s closing price of $161.07 on Dec 5.

In fact, solid dividend payouts are arguably the biggest enticement for real estate investment trusts (REIT) investors. Alexandria’s common stock dividend for 2019 indicates a rise of 7% over the year ended Dec 31, 2018.

Further, earlier this June, the company announced a 3% sequential hike in second-quarter dividend to $1. These dividend hikes reflect Alexandria’s continued efforts to boost shareholder wealth.

Per management, the hike in dividend is in sync with the company’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, 2019, the funds from operations (FFO) payout ratio remained at 57%, which is encouraging.

Notably, Alexandria focuses on Class A properties concentrated in urban campuses, primarily for life-science and technology entities. These locations are characterized by high barriers to entry and exit, and a limited supply of available space. This highly-dynamic setting adds to the productivity and efficiency of tenants, which, in turn, ensures steady rental revenues for the company. In fact, 78% of the annual rental revenues are from Class A properties in AAA locations.

Moreover, high demand for Class A properties in AAA locations has been boosting occupancy level. The company is witnessing strong demand for space in key life-science markets. In fact, the company enjoys a stellar10-year historical occupancy rate of 96%. Such a high level of occupancy is anticipated to continue in the upcoming quarters.

These favorable factors fuel growth in net cash provided by operating activities. Thereby, this aids the company hike its quarterly dividend, as well as maintain a low FFO payout ratio.

In the past three months, shares of Alexandria have gained 5.2%, as against its industry’s loss of 3.2%. Alexandria currently carries a Zacks Rank #3 (Hold).

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Cousins Properties Incorporated’s (NYSE:CUZ) shares have gained 15.1% over the past three months. At present, the stock carries a Zacks Rank of 2 (Buy).

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