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Investors are always delighted to hear that a stock in their portfolio has announced a dividend increase. For income investors, it means a monthly or quarterly raise. However, for investors more concerned with growth, such dividend hikes can also portend an increase in future earnings.
A dividend increase often indicates that the Board of Directors believes future earnings can comfortably cover the dividend hike. In addition, a dividend increase can make a stock more attractive to investors, potentially leading to share price appreciation.
Here are three real estate investment trusts (REITs) that have announced dividend hikes recently. Notably, one REIT hadn't increased its dividend for seven years.
Universal Health Realty Income Trust (UHT) is a Pennsylvania-based health care REIT that owns and operates health care facilities such as acute care and rehabilitation hospitals, medical office buildings, free-standing ERs and child care centers. Universal Health Realty Income Trust has 76 properties across 21 states, and 68% of its properties are medical buildings and clinics. Universal Health Realty was founded in 1986.
On June 5, Universal Health Realty Income Trust announced an increase in its quarterly dividend from $0.725 to $0.73 per share. The dividend will be paid on June 28 to stockholders as of June 17.
Universal also increased the quarterly dividend from $0.72 to $0.725 per share last December and has paid quarterly dividends for 37 consecutive years. Its dividend growth since 2019 is 7.3%, and it has raised its dividend six times in small increments with no cuts or suspensions.
The annualized $2.92 dividend now yields 7.39%. However, one caveat is that the payout ratio is now 88%, which does not leave much room for further increases unless Universal also increases its funds from operations (FFO).
Essential Properties Realty Trust Inc. (NYSE:EPRT) is a Princeton, NJ-based diversified REIT that owns and manages single-tenant properties with net leases for service-oriented and experience-based businesses. Essential Properties was founded in 2016 and has a portfolio of 1,937 properties across 48 states. Currently, 99.9% of its properties are leased, with a weighted average lease term (WALT) of 14.1 years.
First quarter 2024 earnings were mixed. On April 24, Essential Properties reported an FFO of $0.42 per share, missing the estimate of $0.46 per share, but revenue of $103.50 million topped the estimate of $101.06 million.
On May 10, Mizuho analyst Vikram Malhotra maintained a "Buy" rating for Essential Properties Realty Trust and raised the price target from $26 to $29.
On June 3, Essential Properties announced an increase in its quarterly dividend of 1.8% from $0.285 to $0.29 per share. The dividend is payable July 12 to shareholders of record as of June 28. The annualized dividend of $1.16 per share now yields 4.15%. The payout ratio of 61.3% allows Essential Properties to continue increasing the dividend regularly.
Over the past five years, Essential has raised its dividend eight times by 38% with no cuts or suspensions.
Welltower Inc. (NYSE:WELL) is a Toledo, OH-based health care REIT that invests in senior housing, post-acute communities and outpatient medical properties by providing capital to operators. Welltower was founded in 1970 under the original name of Health Care Fund and incorporated as a REIT in 1985. It is a member of the S&P 500.
Welltower has a total portfolio of 2,096 properties, comprising senior housing, outpatient medical and long-term/post-acute care across the U.S.
On April 29, Welltower reported its Q1 earnings. FFO of $1.01 per share beat the consensus estimate of $0.95. Revenue of $1.859 billion beat the consensus estimate of $1.806 billion and topped Q1 2023 revenue of $1.561 billion.
Welltower also increased its FY24 FFO from $3.95-$4.10 per share to $4.02-$4.15 per share.
On May 8, Mizuho analyst Omotayo Okusanya maintained a "Buy" rating for Welltower and raised the price target from $98 to $105.
On June 3, Welltower announced that beginning with the second quarter of 2024, it expects to increase its quarterly dividend by 10% from $0.61 to $0.67 per share. The exact date of payment has yet to be announced.
This is significant news because it's the first dividend increase by Welltower since 2017 and the dividend was cut from $0.87 to $0.61 per share in May 2020 during the COVID-19 crisis. Welltower is a REIT that is certainly on the upswing, given its recent increases in earnings, dividend payments and analyst price targets. The share price has risen 36.2% since touching a low of $76.84 in early October.
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