Equity Residential (EQR), a real estate investment trust (REIT), has recently declared a second quarter 2012 dividend of 33.75 cents per share, which is payable on July 13, 2012 to shareholders of record as on June 22, 2012.
A steady dividend payout facilitates the long-term strategy of Equity Residential to provide attractive risk-adjusted returns to its stockholders. Investors looking for high dividend yields are increasingly favoring REITs. Solid dividend payouts are arguably the biggest enticement for REIT investors as the U.S. law requires REITs to distribute 90% of their annual taxable income in the form of dividends to shareholders.
Earlier, during fourth quarter 2010, Equity Residential implemented a new dividend policy to better align the dividend payout with its actual annual operating results and provide greater transparency to investors. Under the new dividend policy, the company aims to pay an annual cash dividend to the tune of 65% of Normalized FFO (funds from operations) for the year.
Funds from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
Consequently, Equity Residential intends to pay a quarterly dividend of 33.75 cents per share for each of the first three quarters of the fiscal year, with the remainder being paid in the fourth quarter to bring the total payment for the year to approximately 65% of Normalized FFO for the reported fiscal year.
Based in Chicago, Illinois, Equity Residential is the largest fully integrated publicly traded multifamily REIT in the U.S. The company has a portfolio of high-quality assets in some of the most desirable markets across the country, which includes New York, Boston, Washington D.C., Seattle, San Francisco and Los Angeles.
With new supply remaining muted until late 2013 or 2014, we expect the multifamily sector to remain comparatively stable in the coming quarters, as renting has emerged as the only viable option for customers who could not get mortgage loans or are unwilling to buy a house at present.
However, the continuous acquisition spree of Equity Residential involves significant upfront operating expenses with limited near-term profitability. New properties usually take time to generate revenues, and will continue to drag down margins till they get established.
We presently have a Neutral recommendation on Equity Residential, which currently has a Zacks #3 Rank that translates into a short-term Hold rating. We also have a Neutral recommendation and a Zacks #3 Rank for UDR Inc. (UDR), one of the competitors of Equity Residential.
EQUITY RESIDENT (EQR): Free Stock Analysis Report
UDR INC (UDR): Free Stock Analysis Report
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