In tune with its efforts to enhance stockholders’ return, Parkway Properties Inc. (PKY) hiked its quarterly cash dividend by 25% sequentially to 18.75 cents per share from 15 cents paid earlier. The new dividend will be paid by this Real Estate Investment Trust (REIT) on Dec 26, 2013 to shareholders of record as of Dec 12, 2013. Parkway is a steady dividend payer and the current dividend marks the company‘s 109th consecutive quarterly dividend to its shareholders.
Dividends & REITs
Solid dividend payouts are arguably the biggest attraction for REIT investors as the U.S. law requires these companies to distribute 90% of their annual taxable income to shareholders.
A steady dividend payout is in line with Parkway’s long-term strategy to provide attractive risk-adjusted returns to its stockholders. The announced quarterly dividend rate at this REIT equates to an annualized rate of common stock dividend of 75 cents per share, resulting in a yield of 4.37% based on the closing price of Parkway’s stock on Nov 12.
Our Take
As a matter of fact, Parkway continues to maintain a strong and flexible balance sheet. Its debt-to-total market capitalization was 41.3% as of Sep 30, 2013. For the quarter, the company had interest and fixed charge coverage ratios of 3.4x and 2.8x, respectively.
With low funds from operations (FFO) payout ratio of 60.0% as of Sep 30, 2013, Parkway has adequate room to enhance its dividend rate going forward. Moreover, as of Sep 30, 2013, the company had cash and cash equivalents worth $42.5 million and we believe that the company has adequate cash to provide optimum shareholder value.
Parkway is currently focused on repositioning its office portfolio and aiming for expansion in key Sunbelt markets across the U.S. Recently, the company acquired 77.5% stake in 7000 Central Park, which is an 18-story, 415,000 square foot, Class A office tower located in the Central Perimeter of Atlanta. Also, it completed the sale of Carmel Crossing, which is a 326,000 square foot office complex in Charlotte, North Carolina.
Hence, with strong fundamentals and opportunistic acquisitions, we believe that the company is well poised to maintain its growth curves and simultaneously reward shareholders with steadily rising dividends.
In addition to Parkway, some other REITs have also increased their dividends in recent times. Concurrent with its third-quarter 2013 earnings release, SL Green Realty Corp. (SLG) increased its quarterly dividend by 52% to 50 cents from 33 cents paid in the prior quarter while Kimco Realty Corporation (KIM) hiked its quarterly dividend rate by 7.1% to 22.5 cents per share. In Sep 2013 Host Hotels & Resorts Inc. (HST) also made a 9.1% sequential raise in its quarterly cash dividend to 12 cents per share.
Parkway currently carries a Zacks Rank #3 (Hold).
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