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Analyst Blog

CapLease, Inc. , a real estate investment trust (REIT), recently increased its quarterly dividend by 8.0% to 7 cents per share. The new dividend is payable on October 15, 2012 to shareholders of record on September 28.

The dividend hike reflects the company’s successful execution of its 2012 business plan to date. In the last eight years, the company has paid uninterrupted dividends to its shareholders, while increasing it three times. The current dividend rate affirms a yield of 5.5%.

The appropriate utilization of investment opportunities and portfolio restructuring programs has paved the way for the company to achieve its objective. Recently, CapLease entered into a build-to-suit arrangement with Vitamin Shoppe, Inc. (VSI - Snapshot Report) to boost the ongoing expansion of its build-to-suit business. Management remains upbeat regarding the portfolio expansion and strong cash flow generation for the remainder of 2012.  

A steady dividend payout facilitates the long-term strategy of CapLease to provide risk-adjusted returns to its shareholders. Solid dividend payouts are arguably the best enticement for REIT investors, as U.S. laws require REITs to distribute 90% annual taxable income in the form of dividends to shareholders.

CapLease is focused on financing for commercial real estate that are net leased primarily to single tenants with investment grade or near-investment grade credit ratings. It provides private and corporate owners of net lease real estate with equity, debt, and mezzanine financing option. As of August 2012, CapLease has cash on hand worth $27 million and about $45 million of additional borrowing capacity under the revolving credit facility.

CapLease currently carries a Zacks #3 Rank, which translates into a short-term Hold rating. We also have a long-term Neutral recommendation on the stock. One of its competitors, Lexington Realty Trust (LXP - Snapshot Report) holds a Zacks #1 Rank (a short-term Strong Buy rating).

Note: Funds from operations, 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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