DDR Hikes Dividend Yet Again - Analyst Blog
January 09 2013 - 8:40AM
Zacks
DDR Corp.
(DDR), a real estate investment trust
(REIT), has recently increased its quarterly dividend by about
12.5% to 13.5 cents. The first quarter 2013 dividend is payable on
April 2 to stockholders of record as of March 14.
This represents DDR’s fifth dividend increase since 2011. If the
current dividend is maintained for the remainder of the year, the
annualized dividend payout of the company would be 54 cents per
share.
The dividend hike reflects continued strong performance by the
company, backed by solid operating results and a diligent execution
of its strategic plan. The company has followed a significant
redevelopment program, disciplined acquisition policy and
monetization of non-income producing assets.
Based on the closing price of $15.69 as on January 08, 2012, the
proposed dividend affirms a yield of 3.44%. A steady dividend
payout facilitates the long-term strategy of DDR to provide
attractive risk-adjusted returns to its stockholders.
Solid dividend payouts are arguably the biggest enticement for REIT
investors as the U.S. law requires these to distribute 90% of their
annual taxable income in the form of dividends to the
shareholders.
We are impressed with the company’s dedication towards continuously
enhancing the shareholders’ value. DDR has long been minimizing the
ground-up development spending in its domestic portfolio, and
instead started allocating capital to the lease-up of existing
projects. These redevelopments have created a growth opportunity
for the company’s existing assets without the level of risk or
capital required for new development. This in turn has enabled DDR
to strengthen the balance sheet and generate considerable cash flow
for portfolio reinvestment as well as increase the cash
distribution to its shareholders.
The REIT industry has been experiencing many dividend hikes lately.
Many of the DDR’s peers have recently hiked their quarterly
dividend payouts. Host Hotels & Resorts, Inc.
(HST) – the largest lodging REIT –
increased its fourth-quarter dividend payout by 80% year over year
to a quarterly payment of 9 cents per share or 36 cents on an
annualized basis. Another Lodging REIT, RLJ Lodging Trust
(RLJ), increased its quarterly dividend
by 24.0% to 20.5 cents per share.
DDR is scheduled to release its fourth-quarter 2012 results on
February 12, 2013. The Zacks Consensus Estimate for the
fourth-quarter FFO (fund from operations) is currently pegged at 27
cents per share. The Earnings Surprise Prediction (ESP), which
represents the difference between the most accurate estimate and
the Zacks Consensus Estimate, for DDR is nil. Thus, we expect the
company to report FFO in line with the Zacks Consensus
Estimate.
DDR currently holds a Zacks Rank #3 (Hold). However, we maintain
our long-term ‘Neutral’ recommendation on the stock.
Note: FFO, a widely accepted and reported measure of the
performance of REITs is derived by adding depreciation,
amortization and other non-cash expenses to net income.
DDR CORP (DDR): Free Stock Analysis Report
HOST HOTEL&RSRT (HST): Free Stock Analysis Report
RLJ LODGING TR (RLJ): Free Stock Analysis Report
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