REITs Increasing Their Dividends And Projected Yields On Cost

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 |  Includes: AVB, DLR, HCP, O, SPG
by: Greg Group

In the current earnings season, many REITs have raised their dividends to reward their shareholders. For some of these REITs, they are still getting their dividends back to levels before the real estate crisis. REITs affected by the crisis are still showing negative dividend growth rates. However, the REITs listed below have positive dividend growth rates that will translate into higher yields on cost in the future. The projected dividend growth rates for the next five years were used to project the future annual dividend and their yields. Here is a listing of REITs growing their dividends (see table below).

Digital Realty Trust, Inc., (NYSE:DLR) a real estate investment trust [REIT], through its controlling interest in Digital Realty Trust, L.P., engages in the ownership, acquisition, development, redevelopment and management of technology-related real estate. DLR stored and delivered a new quarterly dividend that is 7.4% higher, to 73 cents per share. The new dividend is payable March 30 to holders of record March 15. The new dividend yield, based on the current price of $69.93, is 4.2%. Based on using the 7.4% dividend increase as a 5 year compound annual growth rate [CAGR], DLR will have a forward yield on cost of 6.0%, with an annual dividend payment of $4.17. This is a 43% increase in the annual dividend by 2017.

HCP, Inc. (NYSE:HCP) is an independent hybrid real estate investment trust. The fund invests in real estate markets of the United States. HCP livened up its payout to shareholders, increasing its dividend 4.2% to 50 cents per share. The new dividend will be paid on Feb. 22. The new dividend yield, based on today's closing stock price of $40.28, is 5.0%. Based on using the 4.2% dividend increase as a 5 year compound annual growth rate [CAGR], HCP will have a forward yield on cost of 6.1%, with an annual dividend payment of $2.46. This is a 23% increase in the annual dividend by 2017.

Realty Income Corporation (NYSE:O) engages in the acquisition and ownership of commercial retail real estate properties in the United States. The company leases its retail properties primarily to regional and national retail chain store operators. O bumped up its monthly payout to 14.55 cents per share from 14.52 cents. O pays monthly dividends. The new dividend yield, based on the closing price of $33.78, is 4.8%. This is the 57th consecutive quarterly increase, and the 64th dividend increase since Realty Income went public in 1994. Based on using a 2.8% dividend increase as a 5 year compound annual growth rate CAGR, O will have a forward yield on cost of 5.5%, with an annual dividend payment of $2.01. This is a 15% increase in the annual dividend by 2017.

AvalonBay Communities, Inc. (NYSE:AVB) engages in the development, redevelopment, acquisition, ownership and operation of multifamily communities in the United States. Apartment REIT AVB raised the rent it pays to shareholders by 8.7% to 97 cents per share. The new dividend is payable on Apr. 16 to shareholders of record as of March 30. The new dividend yield, based on the closing price of $134.03, is 2.9%. Based on using a 4.5% dividend increase as a 5 year compound annual growth rate CAGR, AVB will have a forward yield on cost of 3.6%, with an annual dividend payment of $4.83. This is a 25% increase in the annual dividend by 2017.

Simon Property Group, Inc. (NYSE:SPG) is an independent equity real estate investment trust. It engages in investment, ownership and management of properties. The firm invests in the real estate markets across the globe. The largest real estate company in the U.S., SPG decorated shareholders' homes with a 5.6% increase in its quarterly dividend to 95 cents per share. The new dividend is payable on Feb. 29 to shareholders of record as of Feb. 15. The new dividend yield, based on the closing price of $137.76, is 2.8%. Based on using a 3.4% dividend increase as a 5 year compound annual growth rate CAGR, SPG will have a forward yield on cost of 3.3%, with an annual dividend payment of $4.50. This is an 18% increase in the annual dividend by 2017.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.