With volatility on the rise as we enter the most volatile months for equities, many analysts are getting defensive with REITs. Tim Plaehn has found four dividend paying REITs to follow.
The power of a dividend focused investment strategy is the ability to build a portfolio with an attractive current yield and have the income stream grow over time. Many dividend stocks have histories of regular dividend increases. You can put some extra pop into your brokerage account values by purchasing shares of growing dividend stocks before they come out with their next dividend increase announcement.
The real estate investment trust (REIT) sector includes many companies that pay growing dividends and their shares have attractive yields. Most REITs announce a new, higher dividend rate once a year and then pay the new rate for the next four quarters.
It is a good idea to maintain REIT database that includes the timing of when the companies typically announce dividend increases as a data point for each REIT. The month before the next expected dividend increase announcement, is a good time to buy or add shares of a REIT that you expect to announce a higher dividend rate.
When the market sees the higher rate, the share price often moves higher, and the result can be a nice short-term gain. You can use this information to buy shares to hold for the long term or simply to profit on the typical high single digit to low double-digit price gain that comes with a higher dividend announcement. In many cases the share price will continue to appreciate until just before the next ex-dividend date.
There are REITs that make their annual dividend increase announcements in almost every month of the year. The majority cluster in the last quarter or the first couple of months of the new year.
As we move into October, there will be more opportunities to make this type of investment. Also, since in recent years September has been very volatile, you may be able to time your purchases to pick up shares when the broader market is weakening.
Here are four REITs that should announce dividend increases in October:
Iron Mountain Inc. (IRM) is a niche REIT that provides information and asset storage, records management, data centers, data management and secure shredding services.
The company has facilities and provides services in Asia, Europe, Africa and South America as well as in North America.
The company converted to REIT status in 2014 and has increased the dividend each year. Last year the payout was boosted by 4%. Funds from Operations (FFO) per share growth has been flat in 2019. However, management is guiding to 4% dividend growth for the next several years.
Iron Mountain announces its new dividend rate at the end of October with a mid-December record date and end of the year payment. IRM yields 7.4%.
Brixmor Property Group (BRX) is an owner and operator of high-quality, open-air shopping centers. The Company’s more than 500 retail centers located primarily in the eastern one-third of the continental United States.
Brixmor went public in late 2013 and has increased its dividend each year, with typical 5% to 6% increases. Last year the dividend rate was boosted by 1.8%. The current dividend rate is less than 60% of the most recent FFO per share. I expect another 2% increase to be announced in late October.
The new dividend rate is for the following year, with the first record and payment date of the higher rate occurring in January. BRX currently yields 5.8%.
Crown Castle International Corp (CCI) owns cell phone towers, which are leased by the various wireless services providers. The company is the nation’s largest provider of shared wireless infrastructure.
Crown Castle converted to REIT status in September 2013 and at that point started to pay dividends. Since the conversion, an increase was not announced every year except for 2016. In 2018 the dividend was boosted by 7.1%. For 2019 management has guided to 10% per share Adjusted FFO growth, which means the next dividend increase should also be close to 10%.
Crown Castle will announce a new higher dividend around Oct. 20 with the record and payment dates in the last half of December. CCI yields 3.1%.
Macerich Co. (MAC) focuses on the acquisition, leasing, management, development and redevelopment of regional malls throughout the United States. Currently the company owns 48 “market dominant” Class A U.S.-based malls. Macerich has paid a growing dividend for more than 20 years.
Last year the quarterly payout increased by 1.5%. Management guidance is for 2019 funds available for distribution per share to be flat compared to last year. However, the current dividend rate is 85% of projected FFO, and management is committed to continuing the annual dividend growth.
I expect a moderate 1% to 2% dividend increase to keep the growth streak alive.
MAC has been a very troubled mall focused REIT, but it appears the share price may finally have found a bottom. A new dividend rate is usually announced in late October with a mid-November record date and early December payment date. MAC yields 9.9%.
Tim Plaehn is the lead investment research analyst for income and dividend investing at Investors Alley. He is the editor for The Dividend Hunter, an investment advisory delivering income investments with double digit growth in share price and dividend payments.
