Essex Property Trust: This West Coast Sharpshooter Hits The Bullseye

Summary

• Essex's dividend growth performance over the long term has been impressive.
• From its IPO in 1994 through Dec. 31, 2020, the company's total return CAGR was 15%.
• The fact that it's been able to compound wealth for shareholders at such a high rate over such a long period of time is simply amazing.
• Looking for a helping hand in the market? Members of iREIT on Alpha get exclusive ideas and guidance to navigate any climate. Get started today »

This article was coproduced with Nicholas Ward.

We highlighted our bullish thesis on the multifamily REIT space throughout 2020. And we're finally seeing strong post-earning rallies now.

Does that mean the value-investing opportunity is over?

To answer that question, let's first remember that much of our bullish sentiment centered around Essex Property Trust (NYSE:ESS). It's one of the rare REITs that's managed to achieve dividend aristocrat status.

Essex currently has a 26-year dividend increase streak, complete with a 7.2% 10-year dividend growth rate. Plus, it wasn't long ago that shares were yielding about 4%.

That was a very attractive yield, in our opinion, especially alongside that payout performance.

(Source)

Admittedly, ESS has since seen strong price appreciation that's bumped its yield down to 3.2%. But we're willing to keep it on our watchlist anyway to buy in again whenever the market presents irrational pricing.

That's partially because its total long-term compound annual growth rate return is even better than its dividend growth performance. From Essex's 1994 IPO through Dec. 31, 2020, that figure was 15%.

Which is simply amazing.

(Source: ESS IR Website)

It speaks to the immense quality ESS brings to the table, making last year's weakness extremely rare. This is a stock that seldom goes on sale, so we were more than happy to accumulate shares of this blue-chip name when we could.

Work From Home Is Here to Stay. But…

What sent Essex Property down last year was, of course, the work-from-home and urban exodus trends. We've spent countless hours researching that first one especially and its likely impact on various property segments.

In so doing, we've acknowledged that the trend is real and likely to be long lasting.

The COVID-19 pandemic accelerated several secular technology-driven trends, for that matter. And the digital workspace is chief among them.

Analyst’s Disclosure:I am/we are long ESS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.