Equity Residential (EQR) Announces 7.2% Hike In Dividend

Equity Residential (NYSE:EQR) finally declared an increase in its first-quarter 2018 dividend. The company will now pay 54 cents for the quarter, which reflects a hike of 7.2% from the prior dividend of 50.375 cents.

Notably, during the fourth-quarter 2017 earnings release, the company announced its decision to no longer fix the common share dividend as a fixed percentage of estimated normalized funds of operations (FFO). Rather, the company will embrace a more conventional policy that is based on actual and projected financial conditions, actual and projected liquidity and operating results, projected cash needs for capital expenditures and other investment activities. Therefore, with its development spend reduced substantially and solid growth in property operations, the company anticipates experiencing considerable increase in available cash flow in the near future.

Based on the hiked rate of 54 cents for the quarter, the annual dividend comes to $2.16 per share. This new dividend will be paid on Apr 13, to shareholders of record on Mar 26, 2018. At this new rate, annualized yield comes at 3.62% based on the stock’s closing price of $59.72 on Mar 15.

The company also announced that its Annual Meeting of Shareholders will be held on Jun 14, 2018 in Chicago, IL.

We believe Equity Residential has adequate capacity to support its dividend policy. Later this January, the company reported fourth-quarter 2017 normalized FFO per share of 83 cents, beating the Zacks Consensus Estimate of 81 cents. The figure also came in higher than 79 cents reported in the year-ago quarter.

Quarterly results at this apartment real estate investment trust (REIT) mirrored enhanced same-store net operating income (NOI) and lease-up NOI. However, the company incurred higher corporate overhead in the quarter.

Notably, Equity Residential has been making concerted efforts to reposition its portfolio in high barrier-to-entry/core markets. It is anticipated to benefit from favorable demographics, lifestyle transformation and creation of new households. As such, we believe the company remains well poised to boost shareholders’ wealth.

However, new apartment supply across Equity Residential’s markets might continue to put pressure on new lease rates, occupancy, retention and result in high concessions as well. Furthermore, rate hike remains another concern.

Notably, solid dividend payouts remain arguably the biggest attraction for REIT investors as the U.S. law requires these companies to distribute 90% of the annual taxable income in the form of dividends to shareholders. Apart from Equity Residential, some other REITs which announced dividend hikes in recent months are Digital Realty (NYSE:DLR) , Prologis Inc. (NYSE:PLD) and Simon Property Group, Inc. (NYSE:SPG) .

Shares of Equity Residential have outperformed the industry it belongs to, over the past month. This Zacks Rank #3 (Hold) company’s shares have gained 3.0%, while the industry recorded growth of 2.2% during this time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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