Mack-Cali (CLI) Ups Dividend By 33%, First Hike Since 2006

Ushering in good news for shareholders, Mack-Cali Realty Corporation (NYSE:CLI) announced a 33.3% hike in its quarterly cash dividend, marking the first increase since 2006. The company will now pay a dividend of 20 cents per share for second-quarter 2017, up from 15 cents paid in the prior quarter. The increased dividend will be paid on Jul 14 to shareholders of record as on Jul 6, 2017.

Based on the increased rate, the annual dividend comes to 80 cents a share, resulting in an annualized yield of about 2.85%, considering Mack-Cali’s closing price of $28.10 on Jun 12.

Per the company’s CEO Michael J. DeMarco, this hike is backed by significant improvement in the company’s operations, particularly, distributable cash flow.

Mack-Cali revealed a three-year strategic initiative in Sep 2015. The company has been making solid strides in this plan which is aimed at transforming the company by focusing on waterfront and transit-based office holdings, as well as on luxury multi-family portfolio growth. It also includes planned exits from non-core markets.

Further, so far in 2017, with its non-core property sale proceeds and other resources, the company has closed over $700 million of property acquisitions, with a focus on three core markets. This included Roseland’s acquisition of its partner’s 85% stake in Monaco, which is a 523 unit high rise community in Jersey City, NJ.

Moreover, the company purchased three office buildings (aggregating 575,000 square feet) in the high demand, affluent Short Hills, NJ market, and three office buildings (totaling 525,000 square feet) in the Giralda Farms campus in Madison, NJ.

Per the company, this transaction helped Mack-Cali practically own 100% of the class A office market in Short Hills, where the rents ranked the highest in the state. The company also intends to upgrade its present amenities and improve offerings with major capital investment programs. Such efforts augur well for its long-term growth.

However, as part of portfolio streamlining efforts, Mack-Cali has been aggressively disposing its assets. In fact, the company anticipates to dispose of a total $800 million for full-year 2017. While such measures are a strategic fit for the long term, the earnings-dilutive impact of huge asset sales cannot be bypassed. Also, rate hike increases its woes.

Admittedly, solid dividend payouts are arguably the biggest enticement for REIT investors and beside Mack Cali another REIT – CoreSite Realty Corporation (NYSE:COR) – declared a dividend increase, of late. This data center REIT will now pay a dividend of 90 cents per share in cash for second-quarter 2017, up from 80 cents paid in the previous quarter, denoting a 12.5% raise. The increased dividend will be paid on Jul 17 to shareholders of record as on Jun 30, 2017.

Shares of Mack-Cali underperformed the Zacks categorized REIT and Equity Trust – Other industry over the past three months. In fact, the company’s shares ascended 5.3% over this time frame, as compared with 6.8% growth recorded by the industry. Nevertheless, the Zacks Consensus estimate for full-year 2017 funds from operations (“FFO”) per share climbed 0.4% to $2.33, over the past 60 days.

Mack-Cali currently has a Zacks Rank #3 (Hold).



Stocks to Consider

Better-ranked stocks in the REIT space include DCT Industrial Trust Inc. (NYSE:DCT) and PS Business Parks, Inc. (NYSE:PSB) . Both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DCT Industrial Trust’s estimates for 2017 funds from operations (“FFO”) per share moved north 0.4% to $2.39, over the past 60 days.

PS Business Parks’ estimates for 2017 FFO per share inched up 1.8% to $6.09, over the past 30 days.

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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