Dividend.com has added another REIT to its Best Dividend Stocks list. This REIT was founded via the merger of three real estate companies that today own more than 17 million square feet of Class A office space and approximately 3,300+ luxury apartments. These properties are located in one of the most desirable real estate markets in the country.
The market they operate in is supply constrained with high barriers to entry. The demographic is typically very affluent and rent is usually a small portion of their topline. They have shorter lease terms which lead to consistently-high annual rent escalations. Their tenant base is extremely diverse in terms of the industries they operate in. The largest tenants are legal companies, followed by financial services, entertainment and accounting & consulting.
It’s been nine years since they IPOed, and they have grown their FFO by more than 50% during that time.
The stock trades near its 52-week high and is still favorable in terms of P/FFO valuation. Dividend-wise, they have now increased their dividend 5 years in a row and have a yield of 2.44%. By REIT standards, it is low, but too high of a yield – even for REITs – can signal that stock is pushing way too much cash out the door and has zero avenues for growth. For every $1 it charges as rent, the REIT is distributing 51 cents as dividends, which leaves plenty of room for the company to reinvest its earnings.
To summarize, here are 4 reasons why you should own this stock:
- 17+ million square feet of Class A office space in a location which is highly affluent and supply constrained.
- Shorter lease terms with their tenants that lead to consistent rent escalations.
- Diverse tenant base with close to 90% occupancy of their properties.
- 6 consecutive years of dividend increase in the 9 years since they IPOed.
Soft Removal From the Best Dividend Stocks List
We are removing a REIT that we added back on 04/11/2014, which has so far given a 103% return and that’s excluding dividends. We remain super bullish on this stock and continue to rate it 3.6.