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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 second-quarter 2024 cash dividend payment. Delighting its shareholders, the company will now pay out a dividend of $1.30 per share, up from the $1.27 paid out in the prior quarter. The increased dividend will be paid out on Jul 15 to shareholders on record as of Jun 28, 2024.
Based on the increased rate, the annual dividend comes to $5.20 per share. This results in an annualized yield of about 4.42%, considering Alexandria’s closing price of $117.67 on Jun 3.
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 5.41%. 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. Alexandria’s total leasing activity aggregated 1.1 million rentable square feet (RSF) of space in the first quarter, reflecting healthy demand for its high-quality office/laboratory space. Of this, lease renewals and re-leasing of space amounted to 994,770 RSF, while leasing of development and redevelopment space totaled 100,232 RSF.
The company registered rental rate growth of 33% during the quarter. On a cash basis, the rental rate increased 19%. The occupancy of operating properties in North America was 94.6% as of Mar 31, 2024, the same as in the prior quarter and up from 93.6% in the year-ago quarter. On a year-over-year basis, same-property net operating income (NOI) increased 1%. It improved 4.2% on a cash basis.
In the reported quarter, investment-grade or publicly traded large-cap tenants accounted for 52% of the annual rental revenues in effect. The weighted average remaining lease term of all tenants is 7.5 years. For Alexandria’s top 20 tenants, it is 9.7 years. This ensures steady rental revenues over the long term. Given the decent demand for its premium assets, this upbeat trend is likely to continue in the upcoming period, driving solid organic growth.
Alexandria has adequate financial flexibility to enhance its market position and capitalize on long-term growth opportunities. The company had $6.0 billion of liquidity at the end of the first quarter. The net debt and preferred stock to adjusted EBITDA was 5.2X, and the fixed-charge coverage was 4.7X on an annualized basis. Its weighted average remaining term of debt was 13.4 years.
For the five-year period ending Dec 31, 2024, Alexandria expects to generate for reinvestment an aggregate of $2.1 billion of net cash provided by operating activities after dividends.
Its dividend payout ratio remains favorably low at 54% for the three months ended Mar 31, 2024. Looking at the company’s solid operating platform, balance sheet strength, ability to generate cash flows and payout ratio, ARE is likely to be able to sustain the hiked dividend.
Apart from Alexandria, Welltower Inc. (WELL - Free Report) and Essential Properties Realty Trust, Inc. (EPRT - Free Report) announced increases in the dividend.
Welltower’s board of directors approved a 10% increase in the quarterly dividend to 67 cents per share, beginning with the second quarter of 2024, up from 61 cents paid earlier. Welltower currently has a Zacks Rank #3.
Essential Properties Realty Trust announced that its board of directors declared around a 1.8% hike in the quarterly cash dividend to 29 cents per share for the second quarter of 2024. Essential Properties currently has a Zacks Rank #3.
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 second-quarter 2024 cash dividend payment. Delighting its shareholders, the company will now pay out a dividend of $1.30 per share, up from the $1.27 paid out in the prior quarter. The increased dividend will be paid out on Jul 15 to shareholders on record as of Jun 28, 2024.
Based on the increased rate, the annual dividend comes to $5.20 per share. This results in an annualized yield of about 4.42%, considering Alexandria’s closing price of $117.67 on Jun 3.
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 5.41%. 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. Alexandria’s total leasing activity aggregated 1.1 million rentable square feet (RSF) of space in the first quarter, reflecting healthy demand for its high-quality office/laboratory space. Of this, lease renewals and re-leasing of space amounted to 994,770 RSF, while leasing of development and redevelopment space totaled 100,232 RSF.
The company registered rental rate growth of 33% during the quarter. On a cash basis, the rental rate increased 19%. The occupancy of operating properties in North America was 94.6% as of Mar 31, 2024, the same as in the prior quarter and up from 93.6% in the year-ago quarter. On a year-over-year basis, same-property net operating income (NOI) increased 1%. It improved 4.2% on a cash basis.
In the reported quarter, investment-grade or publicly traded large-cap tenants accounted for 52% of the annual rental revenues in effect. The weighted average remaining lease term of all tenants is 7.5 years. For Alexandria’s top 20 tenants, it is 9.7 years. This ensures steady rental revenues over the long term.
Given the decent demand for its premium assets, this upbeat trend is likely to continue in the upcoming period, driving solid organic growth.
Alexandria has adequate financial flexibility to enhance its market position and capitalize on long-term growth opportunities. The company had $6.0 billion of liquidity at the end of the first quarter. The net debt and preferred stock to adjusted EBITDA was 5.2X, and the fixed-charge coverage was 4.7X on an annualized basis. Its weighted average remaining term of debt was 13.4 years.
For the five-year period ending Dec 31, 2024, Alexandria expects to generate for reinvestment an aggregate of $2.1 billion of net cash provided by operating activities after dividends.
Its dividend payout ratio remains favorably low at 54% for the three months ended Mar 31, 2024. Looking at the company’s solid operating platform, balance sheet strength, ability to generate cash flows and payout ratio, ARE is likely to be able to sustain the hiked dividend.
Shares of this Zacks Rank #3 (Hold) company have risen 1.9% in the past year compared with the industry’s growth of 1.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
Other REITs Announcing Dividend Hike
Apart from Alexandria, Welltower Inc. (WELL - Free Report) and Essential Properties Realty Trust, Inc. (EPRT - Free Report) announced increases in the dividend.
Welltower’s board of directors approved a 10% increase in the quarterly dividend to 67 cents per share, beginning with the second quarter of 2024, up from 61 cents paid earlier. Welltower currently has a Zacks Rank #3.
Essential Properties Realty Trust announced that its board of directors declared around a 1.8% hike in the quarterly cash dividend to 29 cents per share for the second quarter of 2024. Essential Properties currently has a Zacks Rank #3.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.