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In tune with its efforts to enhance stockholders’ return, EastGroup Properties Inc. (EGP - Snapshot Report) hiked its quarterly cash dividend sequentially by 1.9% to 54 cents per share from 53 cents. The new dividend will be paid on Sep 30, 2013 to shareholders of record as of Sep 19, 2013.

EastGroup has a consistent track record of increasing shareholders' wealth. Notably, the company has raised or maintained its dividend for 21 consecutive years and hiked it for 18 years within this period.

Dividends & REITs

Solid dividend payouts are arguably the biggest attraction for real estate investment trust (REIT) investors as the U.S. law requires these companies to distribute 90% of their annual taxable income in the form of dividends to shareholders.

A steady dividend payout is in line with the long-term strategy of EastGroup to provide attractive risk-adjusted returns to its stockholders. The announced quarterly dividend rate at this REIT equates to an annualized rate of common stock dividend of $2.16 per share, resulting in a yield of 3.81% based on the closing price of EastGroup’s stock on Aug 29.

Our Take

As a matter of fact, EastGroup continues to maintain a strong and flexible balance sheet. As of Jun 30, 2013, its debt-to-total market capitalization was 34.6%. For the quarter, the company had interest and fixed charge coverage ratios of 3.8x.  

EastGroup is currently focused on expanding its industrial properties business in key Sunbelt markets across the U.S. and primarily in the states of Florida, Texas, Arizona, California and North Carolina. The company aims at improving its portfolio with premier business distribution facilities positioned near major transportation hubs.

Last month, the company reported second-quarter 2013 FFO (funds from operations) of 80 cents per share, beating the Zacks Consensus Estimate by nearly 2.6% and the year-ago quarter figure by 3.9%. Results were driven by solid leasing activities that helped improve occupancy and reap positive same property operating performances.

EastGroup also continues to broaden its platform and purchased an eight business distribution buildings complex in Dallas in May. Recently, the company also disclosed a number of development activities.

Hence, with strong fundamentals and opportunistic acquisitions, we believe that the company is well poised to maintain its growth curves and simultaneously reward shareholders with steadily rising dividends.

EastGroup currently carries a Zacks Rank #2 (Buy). Some other stocks worth considering in the same industry include CubeSmart (CUBE - Snapshot Report), Douglas Emmett Inc. (DEI - Snapshot Report) and Getty Realty Corp. (GTY - Snapshot Report). All these stocks also carry a Zacks Rank #2 (Buy).

Note: 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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