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Alexandria (ARE) Rewards Investors, Hikes Dividend by 2.4%
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Alexandria Real Estate Equities, Inc. (ARE - Free Report) announced a 2.4% sequential hike in its fourth-quarter 2023 cash dividend payout. Delighting its shareholders, the company will now pay out a dividend of $1.27 per share, up from the $1.24 paid out in the prior quarter. The increased dividend will be paid out on Jan 12, 2024 to shareholders on record as of Dec 29, 2023.
Based on the increased rate, the annual dividend comes to $5.08 per share. This results in an annualized yield of about 4.24%, considering Alexandria’s closing price of $119.89 on Dec 4. For the year ending Dec 31, 2023, the common stock dividend marks an increase of 24 cents or 5% year over year.
Solid dividend payouts are arguably the biggest enticements for real estate investment trust investors, and Alexandria remains committed to that. It has increased its dividend 11 times in the last five years, and the five-year annualized dividend growth rate is 5.56%. This is attractive to income investors and represents a steady income stream. Check Alexandria’s dividend history here.
Can Alexandria Maintain Its Payout?
Alexandria's primary emphasis is on the development of Class A/A+ properties strategically located within AAA innovation cluster regions. These locations are highly appealing to life science, agtech and technology companies seeking tenancy. Moreover, these locations are characterized by high barriers to entry for new landlords, high barriers to exit for tenants and a limited supply of available space. Tenants mainly rely on a central lab-based infrastructure to optimize their research capabilities and workflow, making it difficult for them to switch locations frequently.
Given this backdrop, the company is generally able to command high rents at its properties, aiding steady revenues. From the beginning of 2023 through Sep 30, Alexandria’s total leasing activity aggregated 3.4 million rentable square feet (“RSF”) of space. In the last 12 months, 80% of the leasing activity was generated from the company’s client base of 825 tenants. Lease renewals and re-leasing of space amounted to nearly 2.6 million RSF.
Moreover, the company’s Class A/A+ properties in AAA locations are experiencing high demand, aiding occupancy levels and rent growth. As of Sep 30, 2023, the occupancy of Alexandria’s operating properties in North America remained high at 93.7%. It registered rental rate growth of 33.9% during the nine months ended Sep 30, 2023.
Given the healthy demand for its premium assets, this upbeat trend is likely to continue in the upcoming period, driving solid organic growth. For 2023, we expect Alexandria’s same-store occupancy to be 94.1%. Rental income is expected to increase 9.5% on a year-over-year basis in 2023.
Moreover, as of Sep 30, 2023, investment-grade or publicly traded large-cap tenants accounted for 49% of the annual rental revenues in effect. The weighted-average remaining lease term of all tenants was seven years as of the end of the third quarter. For Alexandria’s top 20 tenants, it was 8.9 years. The lease term has remained steady over the recent quarters. This ensures steady rental revenues over the long term.
Alexandria has adequate financial flexibility to enhance its market position and capitalize on long-term growth opportunities. The company had $5.9 billion of liquidity at the end of the third quarter of 2023. The net debt and preferred stock to adjusted EBITDA was 5.4X, and the fixed-charge coverage was 4.8X in the third quarter of 2023 on an annualized basis. As of the end of the third quarter, Alexandria had no debt maturities before 2025, and its weighted-average remaining term was 13.1 years.
For the five-year period ending Dec 31, 2023, Alexandria expects to generate for reinvestment an aggregate of $1.8 billion of net cash provided by operating activities after dividends.
Its funds from operations (FFO) payout ratio remains favorably low at 55% for the three months ended Sep 30, 2023. Looking at the company’s solid operating platform, balance sheet strength, ability to generate cash flows and payout ratio, it is likely to be able to sustain the hiked dividend.
Shares of this Zacks Rank #3 (Hold) company have increased 18.4% in the past month compared with the industry’s rise of 10.3%.
The Zacks Consensus Estimate for Iron Mountain’s current-year FFO per share of $3.97 suggests projected growth of 4.47%.
The Zacks Consensus Estimate for STAG Industrial’s 2023 FFO per share has moved marginally upward in the past month to $2.28 and indicates an estimated increase of 3.2% year over year.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.
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Alexandria (ARE) Rewards Investors, Hikes Dividend by 2.4%
Alexandria Real Estate Equities, Inc. (ARE - Free Report) announced a 2.4% sequential hike in its fourth-quarter 2023 cash dividend payout. Delighting its shareholders, the company will now pay out a dividend of $1.27 per share, up from the $1.24 paid out in the prior quarter. The increased dividend will be paid out on Jan 12, 2024 to shareholders on record as of Dec 29, 2023.
Based on the increased rate, the annual dividend comes to $5.08 per share. This results in an annualized yield of about 4.24%, considering Alexandria’s closing price of $119.89 on Dec 4. For the year ending Dec 31, 2023, the common stock dividend marks an increase of 24 cents or 5% year over year.
Solid dividend payouts are arguably the biggest enticements for real estate investment trust investors, and Alexandria remains committed to that. It has increased its dividend 11 times in the last five years, and the five-year annualized dividend growth rate is 5.56%. This is attractive to income investors and represents a steady income stream. Check Alexandria’s dividend history here.
Can Alexandria Maintain Its Payout?
Alexandria's primary emphasis is on the development of Class A/A+ properties strategically located within AAA innovation cluster regions. These locations are highly appealing to life science, agtech and technology companies seeking tenancy. Moreover, these locations are characterized by high barriers to entry for new landlords, high barriers to exit for tenants and a limited supply of available space. Tenants mainly rely on a central lab-based infrastructure to optimize their research capabilities and workflow, making it difficult for them to switch locations frequently.
Given this backdrop, the company is generally able to command high rents at its properties, aiding steady revenues. From the beginning of 2023 through Sep 30, Alexandria’s total leasing activity aggregated 3.4 million rentable square feet (“RSF”) of space. In the last 12 months, 80% of the leasing activity was generated from the company’s client base of 825 tenants. Lease renewals and re-leasing of space amounted to nearly 2.6 million RSF.
Moreover, the company’s Class A/A+ properties in AAA locations are experiencing high demand, aiding occupancy levels and rent growth. As of Sep 30, 2023, the occupancy of Alexandria’s operating properties in North America remained high at 93.7%. It registered rental rate growth of 33.9% during the nine months ended Sep 30, 2023.
Given the healthy demand for its premium assets, this upbeat trend is likely to continue in the upcoming period, driving solid organic growth. For 2023, we expect Alexandria’s same-store occupancy to be 94.1%. Rental income is expected to increase 9.5% on a year-over-year basis in 2023.
Moreover, as of Sep 30, 2023, investment-grade or publicly traded large-cap tenants accounted for 49% of the annual rental revenues in effect. The weighted-average remaining lease term of all tenants was seven years as of the end of the third quarter. For Alexandria’s top 20 tenants, it was 8.9 years. The lease term has remained steady over the recent quarters. This ensures steady rental revenues over the long term.
Alexandria has adequate financial flexibility to enhance its market position and capitalize on long-term growth opportunities. The company had $5.9 billion of liquidity at the end of the third quarter of 2023. The net debt and preferred stock to adjusted EBITDA was 5.4X, and the fixed-charge coverage was 4.8X in the third quarter of 2023 on an annualized basis. As of the end of the third quarter, Alexandria had no debt maturities before 2025, and its weighted-average remaining term was 13.1 years.
For the five-year period ending Dec 31, 2023, Alexandria expects to generate for reinvestment an aggregate of $1.8 billion of net cash provided by operating activities after dividends.
Its funds from operations (FFO) payout ratio remains favorably low at 55% for the three months ended Sep 30, 2023. Looking at the company’s solid operating platform, balance sheet strength, ability to generate cash flows and payout ratio, it is likely to be able to sustain the hiked dividend.
Shares of this Zacks Rank #3 (Hold) company have increased 18.4% in the past month compared with the industry’s rise of 10.3%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are Iron Mountain (IRM - Free Report) and STAG Industrial, Inc. (STAG - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Iron Mountain’s current-year FFO per share of $3.97 suggests projected growth of 4.47%.
The Zacks Consensus Estimate for STAG Industrial’s 2023 FFO per share has moved marginally upward in the past month to $2.28 and indicates an estimated increase of 3.2% year over year.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.