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EastGroup Announces a 10.2% Dividend Hike: Is This Hike Sustainable?

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EastGroup Properties (EGP - Free Report) announced a hike of 10.2% in its quarterly dividend, raising it to $1.40 per share from $1.27 paid earlier. The increased dividend will be paid out on Oct. 15 to shareholders on record as of Sep. 30, 2024.

Based on the increase, the annual dividend rate now comes to $5.60 a share, resulting in an annualized yield of 2.99%, considering EastGroup’s closing price of $187 on Aug. 26.

Solid dividend payouts remain the biggest enticements for REIT investors, and EastGroup Properties is committed to boosting shareholder wealth. The company has hiked its dividend in each of the last 13 years. The recent dividend hike marks its 179th consecutive quarterly distribution to shareholders. Further, EGP increased or maintained its dividend for 32 consecutive years and hiked it for 29 years during this period.

In the last five years, EastGroup has increased its dividend seven times, and the annualized dividend growth rate for this period is 15.88%. This is attractive to income investors and represents a steady income stream. Check EastGroup Properties’ dividend history here.

EGP’s Stock Fundamentals & Financial Performance

This industrial REIT focuses on the development, acquisition and operation of industrial properties in major Sunbelt markets throughout the United States. With its focus on the ownership of premier distribution facilities usually clustered near major transportation features in supply-constrained submarkets, EastGroup has a well-leased industrial portfolio.

The company’s operating portfolio was 97.4% leased and 97.1% occupied as of June 30, 2024. Also, the average occupancy of the operating portfolio was 97.0% for the second quarter of 2024.

EastGroup has a decent earnings performance. It beat the Zacks Consensus Estimate in two of the trailing four quarters, matched on one occasion and missed on the remaining quarter on funds from operations (FFO) per share basis, the average surprise being 0.14%. Over the next five years, the company’s FFO per share is projected to grow at a rate of 8.0%.

This industrial REIT churns a cash flow of $8.02 per share compared with the industry’s average of $1.69. Moreover, EastGroup Properties’ return on equity (“ROE”) is 8.69%, significantly higher than the industry’s ROE of 3.26%.

Industrial REIT Outlook

Amid an e-commerce boom, companies are making efforts to improve supply-chain efficiencies, propelling demand for logistics infrastructure and efficient distribution networks. This is aiding the industrial real estate market to prosper.

Apart from the fast adoption of e-commerce, industrial real estate space is anticipated to gain traction over the long run from a likely rise in the inventory levels. Given EGP’s solid capacity to offer modern logistics facilities, it is well-poised to bank on this trend.

EGP’s Conclusion

Particularly for EastGroup, we believe such distribution activity highlights the company’s operational strength and commitment to rewarding its shareholders handsomely.

The latest hike reflects EastGroup’s high-quality portfolio and its ability to generate solid cash flow growth through its operating platform.

Investors are always on the lookout for companies with a track record of consistent and incremental dividend payments to put their money on. Such moves will boost investors’ confidence in the stock.

Over the past three months, shares of this Zacks Rank #3 (Hold) company have rallied 17.3% compared with the industry’s growth of 19.2%.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Cousins Properties (CUZ - Free Report) and Lamar Advertising (LAMR - 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 Cousins Properties’ 2024 FFO per share has moved marginally northward over the past month to $2.66.

The Zacks Consensus Estimate for Lamar Advertising’s current-year FFO per share has been marginally raised over the past month to $8.09.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.


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