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Alexandria (ARE) Rewards Investors With 2.75% Dividend Hike

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Alexandria Real Estate Equities, Inc. (ARE - Free Report) announced a 2.75% sequential hike in second-quarter 2021 cash dividend. The company will now pay a dividend of $1.12 per share, up from $1.09 paid in the first quarter. The increased dividend will be paid on Jul 15 to shareholders of record on Jun 30, 2021.

Based on the increased rate, the annual dividend comes to $4.48 a share, resulting in an annualized yield of about 2.48%, considering Alexandria’s closing price of $180.72 on Jun 1.

In fact, solid dividend payouts are arguably the biggest enticement for real estate investment trusts (“REIT”) investors and Alexandria also remains committed to that. Last December, the company announced a 2.8% sequential hike in fourth-quarter 2020 cash dividend to $1.09. Its common stock dividend of $4.36 per share for the 12 months ending Jun 30, 2021, marks a 5.8% hike over the 12 months ended Jun 30, 2020. Such hikes reflect Alexandria’s continued efforts to boost shareholder wealth.

Per management, the hike in dividend is in sync with the company’s strategy of sharing growth in cash flows from operating activities with its stockholders, while also retaining a significant portion to reinvest in its strong development and redevelopment pipeline that consists of new Class A properties. Notably, for first-quarter 2021, the company’s funds from operations (“FFO”) payout ratio remains favorably low at 60%, indicating that the dividend is sustainable and there is scope for further growth.

Markedly, Alexandria focuses on Class A properties concentrated in urban campuses, primarily for the life science and technology entities. These locations are characterized by high barriers to entry and a limited supply of available space. This highly dynamic setting adds to the productivity and efficiency of the tenants, which in turn, ensure steady rental revenues for the company. As of first-quarter 2021, investment-grade or publicly-traded large-cap tenants accounted for 55% of annual rental revenues in effect.

In fact, high demand for Class A properties in AAA locations is boosting the level of occupancy and driving growth in rents. The company is witnessing strong demand for space in key life science markets. Occupancy of operating properties in North America remained high at 94.5% as of Mar 31, 2021. The company registered decent rental rate growth of 36.2% during the first quarter. On a cash basis, the rental rate increased 17.4%. Such a high level of occupancy is anticipated to continue in the upcoming quarters as well and support rent growth and cash flows.

Moreover, Alexandria has the adequate financial flexibility to cushion and enhance its market position. The company had $4.3 billion of liquidity as of the end of the reported quarter. Net debt and preferred stock to adjusted EBITDA was 5.8x and fixed-charge coverage ratio was 4.7x for first-quarter 2021 annualized. Also, the company has no debt maturities prior to 2024 and its weighted-average remaining term of debt as of Mar 31, 2021 is 13 years. This solid financial position aids the company to hike its dividend and enhance shareholder value.

Over the past year, shares of Alexandria have gained 16.8% compared with its industry's growth of 14.9%. Alexandria currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment ResearchImage Source: Zacks Investment Research

Stocks to Consider

Industrial Logistics Properties Trust’s (ILPT - Free Report) FFO per share estimate for the current year moved up marginally to $1.88 in the past week. The company currently carries a Zacks Rank of 2 (Buy).

OUTFRONT Media Inc.’s (OUT - Free Report) Zacks Consensus Estimate for 2021 FFO per share has moved nearly 6% north to 89 cents over the past month. The company carries a Zacks Rank of 2, currently.

Braemar Hotels & Resorts Inc. (BHR - Free Report) carries a Zacks Rank of 2, at present. The Zacks Consensus Estimate for the ongoing year’s FFO per share has been revised 37.5% upward to 44 cents over the past month.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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