Shares of Kite Realty Group Trust (KRG) rose 1.33% during the trading session on March 21, following the quarterly dividend hike announcement the previous day. In particular, the company will now pay a dividend of 6.5 cents per share for first-quarter 2014, up from 6.0 cents paid in the prior quarter, reflecting an 8.3% rise sequentially.
The dividend hike depicts the company’s strong operating performance in 2013, notable acquisitions and high cash flow generation from premium developments and redevelopments. Alongside, solid growth in same-property net operating income in 2013 was the driver.
Based on the current dividend rate, the 2014 annual dividend rate comes to 26 cents per share, 2 cents above the 2013 annual dividend of 24 cents per share. As a matter of fact, the new dividend rate results in an annualized yield of about 4.3% based on Kite Realty’s closing price of $6.08 on March 21.
A steady dividend payout is in line with the long-term strategy of this retail real estate investment trust (REIT) to provide attractive risk-adjusted returns to its stockholders. As of Dec 31, 2013, the company had cash and cash equivalents worth $18.1 million, up from $12.5 million as of Dec 31, 2012. Hence, we believe Kite Realty has sufficient cash to pay dividends.
Last month, Kite Realty reported fourth-quarter 2013 adjusted FFO (funds from operations) of 11 cents per share, which was in line with the Zacks Consensus Estimate and exceeded the year-ago figure by a penny. The result reflected substantial increase in revenues, though partially offset by the impact of share dilution resulting from common shares issuance.
In addition to Kite Realty, a number of other REITs have increased their dividend payouts this month. This includes UDR Inc. (UDR) that announced a 10.6% sequential hike in its quarterly dividend rate to 26 cents per share. The other is Taubman Centers Inc. (TCO) that hiked its quarterly dividend by around 8% sequentially to 54 cents per share.
Solid dividend payouts are arguably the biggest attraction for REIT investors since the U.S. law requires these companies to distribute 90% of their annual taxable income in the form of dividends to shareholders.
Kite Realty currently carries a Zacks Rank #3 (Hold). A better-ranked retail REIT is Simon Property Group Inc. (SPG) having a Zacks Rank #2 (Buy).
Note: 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.
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