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Vornado Realty (VNO) Pleases Investors With 5% Dividend Hike
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Vornado Realty Trust (VNO - Free Report) has announced a hike in its quarterly common dividend, giving shareholders a reason to rejoice. Specifically, the company will now pay a dividend of 63 cents per share, up from 60 cents paid in the prior quarter. The increased dividend will be paid on Feb 15 to shareholders of record as on Jan 29, 2018.
Based on the increased rate, the 2018 annual dividend comes to $2.52 a share, resulting in an annualized yield of about 3.53%, considering Vornado’s closing price of $71.30 on Jan 17. Though this is lower than the industry average of 4.36%, the hike will likely increase investors’ confidence in the stock.
Notably, Vornado has a concentration of high-quality assets, with a strategic focus on expanding its market share in New York City office and Manhattan street retail. In addition, the company owns 555 California Street, in the heart of San Francisco's Financial District, as well as theMART in Chicago's River North District, which are iconic assets in signature cities.
This focus on having assets in such a few select high-rent, high barrier-to-entry geographic markets, as well as a diversified tenant base, which includes several industry bellwethers, is anticipated to drive steady cash flows and fuel its growth engine over the long term.
Moreover, the company, focused on improving its core business, has been making opportunistic acquisitions and divestitures in addition to business spin-offs. In fact, well-planned sell-outs provide the company with dry powder to reinvest in opportunistic acquisitions.
The 2017 spin-off of its Washington, D.C properties made Vornado a New York-based office and retail REIT. The focus on New York is a strategic fit given that the city is preferred by businesses, residents, tourists and investors. It enjoys solid long-term employment growth with a diversified employment base. In addition, the city attracts international tourists and enjoys steady tourism growth.
Also, the previous spin-off of its shopping center business into a publicly-traded REIT named Urban Edge Properties (UE - Free Report) was an outcome of Vornado’s decision to separate two businesses, which have been together for legacy reasons but with no real operating synergies. Such efforts to streamline the company’s business are likely to drive Vornado’s long-term growth.
Vornado boasts a strong liquidity position with decent leverage and well-manageable debt maturities. As of Sep 30, 2017, Vornado had nearly $1.3 billion of cash and cash equivalents. Additionally, in October 2017, the company announced the extension of one of the two $1.25-billion revolving credit facilities. The extended credit facility will improve the company’s liquidity position. Given its financial position and lower debt-to-equity ratio compared to that of the industry, this dividend rate is likely to be sustainable.
The company is likely to benefit from improvement in the economy and the job market. However, dilutive impact on earnings from divestitures of assets cannot be bypassed in the near term. Further, intense competition and hike in interest rates remain concerns.
Solid dividend payouts remain arguably the biggest enticement for REIT investors. Apart from Vornado some other REITs which announced dividend hikes in recent months include Realty Income Corporation (O - Free Report) , Alexandria Real Estate Equities (ARE - Free Report) and Ventas, Inc. (VTR - Free Report) .
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Vornado Realty (VNO) Pleases Investors With 5% Dividend Hike
Vornado Realty Trust (VNO - Free Report) has announced a hike in its quarterly common dividend, giving shareholders a reason to rejoice. Specifically, the company will now pay a dividend of 63 cents per share, up from 60 cents paid in the prior quarter. The increased dividend will be paid on Feb 15 to shareholders of record as on Jan 29, 2018.
Based on the increased rate, the 2018 annual dividend comes to $2.52 a share, resulting in an annualized yield of about 3.53%, considering Vornado’s closing price of $71.30 on Jan 17. Though this is lower than the industry average of 4.36%, the hike will likely increase investors’ confidence in the stock.
Notably, Vornado has a concentration of high-quality assets, with a strategic focus on expanding its market share in New York City office and Manhattan street retail. In addition, the company owns 555 California Street, in the heart of San Francisco's Financial District, as well as theMART in Chicago's River North District, which are iconic assets in signature cities.
This focus on having assets in such a few select high-rent, high barrier-to-entry geographic markets, as well as a diversified tenant base, which includes several industry bellwethers, is anticipated to drive steady cash flows and fuel its growth engine over the long term.
Moreover, the company, focused on improving its core business, has been making opportunistic acquisitions and divestitures in addition to business spin-offs. In fact, well-planned sell-outs provide the company with dry powder to reinvest in opportunistic acquisitions.
The 2017 spin-off of its Washington, D.C properties made Vornado a New York-based office and retail REIT. The focus on New York is a strategic fit given that the city is preferred by businesses, residents, tourists and investors. It enjoys solid long-term employment growth with a diversified employment base. In addition, the city attracts international tourists and enjoys steady tourism growth.
Also, the previous spin-off of its shopping center business into a publicly-traded REIT named Urban Edge Properties (UE - Free Report) was an outcome of Vornado’s decision to separate two businesses, which have been together for legacy reasons but with no real operating synergies. Such efforts to streamline the company’s business are likely to drive Vornado’s long-term growth.
Vornado boasts a strong liquidity position with decent leverage and well-manageable debt maturities. As of Sep 30, 2017, Vornado had nearly $1.3 billion of cash and cash equivalents. Additionally, in October 2017, the company announced the extension of one of the two $1.25-billion revolving credit facilities. The extended credit facility will improve the company’s liquidity position. Given its financial position and lower debt-to-equity ratio compared to that of the industry, this dividend rate is likely to be sustainable.
The company is likely to benefit from improvement in the economy and the job market. However, dilutive impact on earnings from divestitures of assets cannot be bypassed in the near term. Further, intense competition and hike in interest rates remain concerns.
Shares of Vornado have underperformed the industry it belongs to, in three months’ time. This Zacks Rank #3 (Hold) company’s shares have descended 4.7%, while the industry incurred loss of 4.6% during this time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Solid dividend payouts remain arguably the biggest enticement for REIT investors. Apart from Vornado some other REITs which announced dividend hikes in recent months include Realty Income Corporation (O - Free Report) , Alexandria Real Estate Equities (ARE - Free Report) and Ventas, Inc. (VTR - Free Report) .
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2018 today >>