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Alexandria (ARE) Rewards Investors With a 2.7% Dividend Hike
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Alexandria Real Estate Equities (ARE - Free Report) recently announced a 2.7% sequential hike in the fourth-quarter 2021 cash dividend. The company will now pay a dividend of $1.15 per share, up from $1.12 paid in the third quarter. The increased dividend will be paid on Jan 14, 2022, to shareholders of record as of Dec 31, 2021.
Based on the increased rate, the annual dividend comes to $4.48 per share, resulting in an annualized yield of about 2.17%, considering Alexandria’s closing price of $206.03 on Dec 5.
Solid dividend payouts are arguably the biggest enticements for real estate investment trusts (REIT) investors. Alexandria’s common stock dividend for 2021 indicates a rise of 5.7% over the year ended Dec 31, 2020.
In June, the company announced a 2.75% sequential hike in second-quarter 2021 cash dividend to $1.12. These dividend hikes reflect Alexandria’s continued efforts to boost shareholder wealth.
Per management, the hike in dividend is in sync with Alexandria’s strategy of sharing growth in cash flows from the operating activities with stockholders while retaining a significant portion to reinvest in its strong development and redevelopment pipeline that consists of new Class A properties. As of Sep 30, 2021, the funds from operations (FFO) payout ratio remained at 58%, which is encouraging.
Alexandria focuses on the 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 ensure steady rental revenues for the company.
During the third quarter of 2021, investment-grade or publicly-traded large-cap tenants accounted for 53% of the annual rental revenues in effect. The weighted-average remaining lease term of all the tenants is 7.4 years and 10.6 years for Alexandria’s top 20 tenants. Also, management noted that the company’s tenant collections have been consistently high, with 99.6% of October 2021 billings collected as of Oct 25, 2021. Also, as of Sep 30, 2021, the tenant receivables balance of $7.7 million continued to be near historic lows.
Moreover, high demand for Class A properties in AAA locations boosted the level of occupancy and drove growth in rents. The company is witnessing strong demand for space in key life science markets. The occupancy of operating properties in North America remained high at 94.4%. Excluding the vacancy at the recently acquired properties, the occupancy was 98.5% as of Sep 30, 2021. Such a high level of occupancy is anticipated to continue in the upcoming quarters and support rent growth.
These favorable factors are expected to fuel growth in net cash provided by operating activities and aid Alexandria to hike its quarterly dividend and maintain a low FFO payout ratio. However, it has a huge development pipeline, which exposes it to the risk of rising construction costs and lease-up concerns.
In the past six months, shares of Alexandria have gained 9.4% compared with its industry’s rise of 1.9%. ARE currently carries a Zacks Rank #4 (Sell).
Image Source: Zacks Investment Research
Key Picks
Some better-ranked picks from the REIT sector include Extra Space Storage Inc. (EXR - Free Report) , CubeSmart (CUBE - Free Report) and Rexford Industrial Realty (REXR - Free Report) .
Extra Space Storage holds a Zacks Rank of 2 (Buy) at present. The 2021 FFO per share for Extra Space Storage is expected to increase 29.9% year over year.
The Zacks Consensus Estimate for EXR’s 2021 FFO per share has been revised 2.1% upward in a week.
The Zacks Consensus Estimate for CubeSmart’s ongoing-year FFO per share has moved 1.4% north to $2.10 over the past week. Its long-term growth rate is projected at 9.8%.
Rexford Industrial holds a Zacks Rank of 2 at present. The long-term growth rate for Rexford Industrial is projected at 12.8%.
The Zacks Consensus Estimate for REXR’s 2021 FFO per share has been revised 1.2% upward in a month to $1.63.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Alexandria (ARE) Rewards Investors With a 2.7% Dividend Hike
Alexandria Real Estate Equities (ARE - Free Report) recently announced a 2.7% sequential hike in the fourth-quarter 2021 cash dividend. The company will now pay a dividend of $1.15 per share, up from $1.12 paid in the third quarter. The increased dividend will be paid on Jan 14, 2022, to shareholders of record as of Dec 31, 2021.
Based on the increased rate, the annual dividend comes to $4.48 per share, resulting in an annualized yield of about 2.17%, considering Alexandria’s closing price of $206.03 on Dec 5.
Solid dividend payouts are arguably the biggest enticements for real estate investment trusts (REIT) investors. Alexandria’s common stock dividend for 2021 indicates a rise of 5.7% over the year ended Dec 31, 2020.
In June, the company announced a 2.75% sequential hike in second-quarter 2021 cash dividend to $1.12. These dividend hikes reflect Alexandria’s continued efforts to boost shareholder wealth.
Per management, the hike in dividend is in sync with Alexandria’s strategy of sharing growth in cash flows from the operating activities with stockholders while retaining a significant portion to reinvest in its strong development and redevelopment pipeline that consists of new Class A properties. As of Sep 30, 2021, the funds from operations (FFO) payout ratio remained at 58%, which is encouraging.
Alexandria focuses on the 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 ensure steady rental revenues for the company.
During the third quarter of 2021, investment-grade or publicly-traded large-cap tenants accounted for 53% of the annual rental revenues in effect. The weighted-average remaining lease term of all the tenants is 7.4 years and 10.6 years for Alexandria’s top 20 tenants. Also, management noted that the company’s tenant collections have been consistently high, with 99.6% of October 2021 billings collected as of Oct 25, 2021. Also, as of Sep 30, 2021, the tenant receivables balance of $7.7 million continued to be near historic lows.
Moreover, high demand for Class A properties in AAA locations boosted the level of occupancy and drove growth in rents. The company is witnessing strong demand for space in key life science markets. The occupancy of operating properties in North America remained high at 94.4%. Excluding the vacancy at the recently acquired properties, the occupancy was 98.5% as of Sep 30, 2021. Such a high level of occupancy is anticipated to continue in the upcoming quarters and support rent growth.
These favorable factors are expected to fuel growth in net cash provided by operating activities and aid Alexandria to hike its quarterly dividend and maintain a low FFO payout ratio. However, it has a huge development pipeline, which exposes it to the risk of rising construction costs and lease-up concerns.
In the past six months, shares of Alexandria have gained 9.4% compared with its industry’s rise of 1.9%. ARE currently carries a Zacks Rank #4 (Sell).
Key Picks
Some better-ranked picks from the REIT sector include Extra Space Storage Inc. (EXR - Free Report) , CubeSmart (CUBE - Free Report) and Rexford Industrial Realty (REXR - Free Report) .
Extra Space Storage holds a Zacks Rank of 2 (Buy) at present. The 2021 FFO per share for Extra Space Storage is expected to increase 29.9% year over year.
The Zacks Consensus Estimate for EXR’s 2021 FFO per share has been revised 2.1% upward in a week.
The Zacks Consensus Estimate for CubeSmart’s ongoing-year FFO per share has moved 1.4% north to $2.10 over the past week. Its long-term growth rate is projected at 9.8%.
The Zacks Consensus Estimate for CubeSmart’s 2021 FFO per share suggests an increase of 22.1% year over year. Currently, CUBE carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Rexford Industrial holds a Zacks Rank of 2 at present. The long-term growth rate for Rexford Industrial is projected at 12.8%.
The Zacks Consensus Estimate for REXR’s 2021 FFO per share has been revised 1.2% upward in a month to $1.63.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.