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Two important measures for real estate investment trusts (REITs) are a solid dividend growth record and recent dividend increases, no matter how large or small. Dividend increases provide investors with the assurance that the REIT's management perceives itself as able to maintain or increase its earnings and revenue into the future.
In addition, dividend increases often lead to a rise in the share price, as the confidence of management, along with a larger dividend yield becomes more attractive to potential investors. It's also important for the REIT to keep its payout ratio at a level where the dividend increases are still well covered by funds from operations (FFO).
Take a look at three REITs from different subsectors that have just increased their quarterly dividends this week:
CubeSmart (NYSE:CUBE) is a Malvern, Pennsylvania-based, internally managed self-storage REIT with over 600 storage facilities across the U.S. It had its initial public offering (IPO) in 2004 under the name U-Store-It. In 2011, it was rebranded as CubeSmart. Between 2012 and 2022, CubeSmart grew its FFO per share by 242%. Its same-store occupancy rate was recently 92.1%.
On Dec. 7, CubeSmart announced a 4.1% increase in its quarterly dividend from $0.49 to $0.51 per share. The dividend is payable on Jan. 16 to shareholders of record on Jan. 2. The new annual dividend of $2.04 per share yields 4.87%.
CubeSmart continues to have an excellent dividend growth record. With this increase, the dividend has now grown 37.2% from $0.32 to $0.51 per share over the past five years. The payout ratio is now 76.6%, still well covered by earnings.
On Oct. 30, Bank of America Securities analyst Jeffrey Spector downgraded CubeSmart from Buy to Neutral and lowered the price target from $51 to $38. The analyst felt that the demand for self-storage facilities was weakening in October.
CubeSmart closed at $33.98 the previous trading day, on a downtrend from July when it traded as high as $46.55. But only three days later in its third-quarter operating results, CubeSmart reported FFO that beat estimates by a penny and also beat the revenue estimate by $27 million. CubeSmart has been on a tear ever since, climbing back to a recent close at $41.81.
Universal Health Realty Income Trust (NYSE:UHT) is a Pennsylvania-based healthcare REIT that owns and operates healthcare facilities such as acute care and rehabilitation hospitals, medical office buildings, free-standing emergency rooms and childcare centers. Universal Health Realty Trust has 77 properties across 21 states. Medical buildings and clinics account for 68% of its properties. Universal Health Realty was founded in 1986.
On Dec. 7, Universal Health Realty announced an increase in its quarterly dividend from $0.72 to $0.725 per share.
For 36 consecutive years, Universal Health Realty Income Trust has paid quarterly dividends. Over the last five years, it's raised the dividend five times in small increments by 6.6% without cuts or suspensions. However, the stock price during this time has declined from over $69 to $42.
The $2.90 annual dividend presently yields 6.9%, but the payout ratio of 87.8% does not leave much room for further dividend increases unless Universal Health begins to increase its FFO.
Essential Properties Realty Trust Inc. (NYSE:EPRT) is a Princeton, New Jersey-based diversified REIT that owns and manages single-tenant properties with net leases for service-oriented and experience-based businesses. It has a portfolio of 1,793 properties across 48 states, and its occupancy rate is 99.8%. Car washes, early childhood educational services and medical and dental services are its three largest portfolio components. Essential Properties was founded in 2016.
On Dec. 7, Essential Properties Realty Trust announced an increase in its quarterly dividend from $ 0.28 to $0.285 per share. This was the second dividend increase this year for Essential Properties. In June, the dividend was increased from $0.2750 to $0.28 per share.
Over the past five years, the dividend has grown by 35.7%. The annual dividend of $1.14 per share now yields 4.6%. The payout ratio of 65.5% is well covered at present.
On Nov. 13, Essential Properties announced the retirement of board Chairman Paul T. Bossidy and the appointment of Scott A. Estes as the new chairman, effective Dec. 31.
B.Riley Securities, Stifel and Truist Securities all have recent Buy ratings on Essential Properties Realty Trust, with price targets ranging from $27 to $29.
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