Select Income (SIR) Increases Dividend By 2%, Shares Up

Ushering in good news for its shareholders, Select Income REIT (NASDAQ:SIR) announced a 2.0% hike in its regular quarterly cash dividend on Tuesday. The company will now pay a dividend of 51 cents per share, up from 50 cents paid earlier. The increased dividend will be paid on or about Aug 18, 2016 to shareholders of record as on Jul 22, 2016. Reflecting positive sentiments, shares of Select Income were up 0.44% in Wednesday’s trading.

Based on the increased rate, the annual dividend comes to $2.04 a share, resulting in an annualized yield of about 7.5%, considering Select Income’s closing price of $27.23 on Jul 13. Given that the company’s dividend yield surpasses the industry average of 3.20%, the stock is likely to draw investor attention ahead.

In fact, solid dividend payouts are arguably the biggest enticement for REIT investors. This represents Select Income’s sixth dividend raise since its IPO in 2012, reflecting its consistent efforts to increase shareholder wealth.

No doubt, Select Income has solid fundamentals to back dividend hikes. The company focuses on properties that are strategic to tenants, like the corporate headquarters and primary distribution hubs. It is also the largest owner of industrial properties in Hawaii. The company has 119 properties having 44.7 million square feet of space and properties located in 35 states. The properties are mainly net leased to single tenants.

Importantly, Select Income enjoys occupancy of 97.8% at its portfolio. Moreover, as of Mar 31, 2016, the company’s weighted average remaining lease term was more than 10 years and no tenant contributed over 4% of its rent. This ensures stable cash flows from its portfolio over a longer period.

Moreover, the company has been a steady performer, operates with a conservative financial profile and has a well-laddered lease expiration schedule. As such, the company seems poised to achieve earnings growth. Hence, the new dividend rate is anticipated to be sustainable.

SELECT INCOME Price

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Select Income presently has a Zacks Rank #3 (Hold). Investors interested in the REIT industry can consider better-ranked stocks like Armada Hoffler Properties, Inc. (NYSE:AHH) , Equity LifeStyle Properties, Inc. (NYSE:ELS) and Post Properties Inc. (NYSE:PPS) . Each of these stocks has a Zacks Rank #2 (Buy).