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The multifamily real estate investment trust (REIT) – UDR Inc. (UDR - Analyst Report) – recently announced a 7% hike in its quarterly cash dividend rate. The company will now pay a dividend of 23.5 cents per share for first-quarter 2013, up from 22 cents paid in the prior-quarter. The increased dividend will be paid on Apr 30, 2013 to stockholders of record on Apr 9.
UDR is focused on managing its capital conservatively and the announced dividend will represent the company’s 162nd consecutive quarterly dividend payment. Based on the current dividend rate, the 2013 annual dividend rate comes to 94 cents per share, 6 cents above the 2012 annual dividend of 88 cents per share.
As of Dec 31, 2012, UDR’s liquidity amounted to $913 million through a combination of cash and undrawn capacity on its credit facilities. We believe that the company has adequate cash to provide optimum shareholder value.
Last month, UDR reported fourth quarter 2012 FFO (funds from operations), excluding non-recurring items, of 35 cents per share, 2 cents ahead of the Zacks Consensus Estimate of 33 cents and a cent above the prior-year quarter figure. The quarterly results benefited from increased rental income and higher occupancy levels.
UDR possesses a strong portfolio of apartment properties in prime business locations in the U.S., and operates across multiple markets that mitigate geographical risks. As of Dec 31, 2012, the company owned or had an ownership position in 54,195 apartment homes including 3,066 homes under development.
Furthermore, UDR is repositioning its portfolio to focus on markets that have better job and rent growth prospects. Recent development and joint venture activities are expected to position the company well for future growth. It has automated most of its businesses and has introduced electronic renewal initiatives, enabling its customers to renew their leases online. As such, the company is well poised to maintain its growth curve and simultaneously benefit the shareholders with steadily rising dividends.
Solid dividend payouts are arguably the biggest attraction for REIT investors since the U.S. law requires these companies to distribute 90% of their annual taxable income in the form of dividends to shareholders.
In addition to UDR, many other REITs have raised their dividends in the recent months. Recently, Taubman Centers Inc. (TCO - Analyst Report) announced an 8.1% hike in its quarterly cash dividend rate, while in February, Simon Property Group Inc. (SPG - Analyst Report) raised its dividend by 4.5% sequentially and BRE Properties Inc. (BRE - Analyst Report) declared a 2.6% sequential hike in its quarterly cash dividend.
Yet, UDR has a significant development pipeline, which increases operational risks in the current credit-constrained market and undermines its growth potential to some extent.
UDR currently retains a Zacks Rank #4 (Sell).