Ushering in good news for its shareholders, the retail real estate investment trust (“REIT”) – Taubman Centers Inc. TCO – announced a 4.6% increase in its quarterly dividend rate. The company will presently pay a dividend of 56.5 cents per share on its common stock, up from 54 cents paid in the prior quarter. The increased dividend will be paid on Mar 31, 2015 to shareholders of record on Mar 20.
Taubman holds an impressive track record of conservative capital management and cash return to its shareholders in the form of a steady dividend. Having never slashed its common dividend since it went public in 1992, the company has, in fact, hiked its dividend 18 times till date. The new dividend rate results in an annual dividend of $2.26, generating annualized yield of 2.96% based on the stock’s closing price of $76.44 on Mar 10.
Adding to its shareholders’ delight, Taubman announced an increase in its share repurchase program by $250 million. As a result, the $200 million share repurchase program, authorized in Aug 2013, now gets extended to $450 million.
The company has already used $132.5 million for buying back nearly 1.9 million shares of its common stock at an average price of $70.48 per share since the program’s inception, leaving around $317.5 million under the current authorization. At the current market price, if the full authorization is used, it would represent almost 7% of the company’s outstanding common shares.
We believe that Taubman has adequate capacity to support its dividend policy and share repurchase program. As of Dec 31, 2014, Taubman’s cash and cash equivalents were $276.4 million, up from around $41 million at year-end 2013.
We believe that, going forward, the company is well poised to improve its results on the back of a solid retail portfolio and strong tenant base. Besides, strategic investments in high-end markets bode well for its top-line growth.
Solid dividend payouts remain arguably the biggest attraction for REIT investors as the U.S. law requires these companies to distribute 90% of their annual taxable income in the form of dividends to shareholders. Apart from Taubman, a number of other REITs have come up with dividend hike announcements of late.
Among them are Prologis Inc. PLD, Essex Property Trust Inc. ESS and HCP Inc. HCP. While Prologis announced a 9% hike in its dividend rate to 36 cents per share, Essex Property raised its quarterly dividend by 10.8% to $1.44 per share and HCP declared a hike of 3.7% to 56.5 cents.
Taubman currently carries a Zacks Rank #3 (Hold).
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