Ushering in good news for its shareholders, UDR Inc. UDR declared a 6% annualized common dividend increase for 2016. The company will now pay a cash dividend of 29.5 cents per share for the first quarter against 27.75 cents paid in the earlier quarter.
The new dividend will be paid on May 2, 2016 to shareholders of record on Apr 11. Based on this increased rate, annualized yield comes to about 3.2%, considering UDR's closing price of $37.05 on Mar 24.
Solid dividend payouts are arguably the biggest attraction for REIT investors and UDR is consistent in this regard. In fact, the new dividend will mark this residential real estate investment trust’s (REIT) 174th quarterly dividend payout at a stretch on its common stock. Prior to the latest hike, the company had increased its dividend per share by 7% in 2015.
Further, UDR is believed to have adequate capital to support its dividend policy. The company came up with fourth-quarter 2015 adjusted funds from operations (FFO) of 42 cents per share, which improved from the year-ago quarter figure of 39 cents per share. The improvement was attributable to an increase in revenues and same-store net operating income.
Importantly, UDR recently joined the coveted S&P 500 index. This Denver, CO-based residential operator owned or had ownership interests in 50,646 apartment homes including 3,222 homes under development as of Dec 31, 2015. Moreover, the company had $987 million available as of that date, through a combination of cash and undrawn capacity on its credit facilities.
Going forward, with improving U.S. apartment fundamentals, efforts to enhance the overall portfolio quality, disciplined capital allocation and a strong balance sheet position, UDR is poised for significant growth and returns. Yet, operational risks associated with construction activities, stiff competition from other housing alternatives and any rise in interest rate pose as concerns.
UDR currently carries a Zacks Rank #3 (Hold). Investors interested in the REIT industry may consider stocks like Essex Property Trust Inc. ESS, Mid-America Apartment Communities Inc. MAA and Post Properties Inc. PPS. Each of the three stocks carries a Zacks Rank #2 (Buy).
Note: FFO, 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.
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