2 Equities Present Multi-Year Dividend Hikes and 6% Yields
By: Ned Piplovic,
Two real estate investment trusts (REITs) offer their investors a combination of moderate share price growth, annual dividend hikes and dividend yields of more than 6% that are double the sector’s average yield.
Both REITs manage portfolios of commercial real estate facilities, such as hotels, office, industrial and retail buildings. The REITs have identical ex-dividend dates of June 28, 2016, with pay dates in mid-July.
Lexington Realty Trust (NYSE:LXP)
Based in New York City, Lexington Realty Trust operates as a self-managed and self-administered real estate investment trust (REIT). The company owns and manages a portfolio of office, industrial and retail properties leased to corporate tenants in the United States. Additionally, the REIT provides investment advisory and asset management services to institutional investors. As of March 31, 2017, the company’s asset portfolio consisted of 188 properties, including land, across almost 44 million square feet in 39 U.S. states. The company began its operations as Lexington franchise in 1973, went public in 1993 under the Lexington Corporate Properties name and was rebranded in 2006 to Lexington Realty Trust.
The current quarterly dividend is $0.175, which is equivalent to a $0.70 annualized payout and a 6.9% dividend yield. The current yield exceeds the company’s 6.4% five-year dividend yield average by 8.2%. Since starting to pay a dividend in 1994, the company reduced its annual payout only in 2008 and 2009 during the most recent financial crisis.
However, the trust resumed its annual dividend hikes in 2009 and boosted its annual distribution at an average annual rate of 8.2%. The annual dividend amount nearly doubled over the last seven years.
The share price experienced considerable volatility during the past 12 months, but eventually managed to rise above June 2016 levels. As of closing on June 15, 2017, the $10.26 share price was still 10% below its 52-week high from late February 2017. However, the current price is 12.4% above the price from June 2016.
RLJ Lodging Trust (NYSE:RLJ)
RLJ Lodging Trust is an independent equity real estate investment trust (REIT). The firm manages real estate funds and primarily invests in premium-branded, focused service and compact full-service hotels. RLJ Lodging Trust has a portfolio of 122 properties with approximately 20,000 rooms, which are located in 21 states and the District of Columbia. Most of the hotels are concentrated in major urban areas and dense markets that provide multiple demand generators from business and leisure travelers. High construction costs and the density of these markets provide significant barriers to entry, which is an advantage as the RLJ Lodging Trust is already established in those markets. The company maintains relationships with leading hotel franchisors and operates locations under well-recognized global brands, including Courtyard by Marriott, Residence Inn by Marriott, Hilton Garden Inn, Homewood Suites by Hilton, Hyatt Place and Embassy Suites. Founded in 2000, RLJ Lodging Trust went public in 2011 and is domiciled in Bethesda, Maryland.
The trust’s current $0.33 quarterly dividend distribution converts to a $1.32 annual payout and a 6.3% dividend yield. This yield is 37.8% higher than the trust’s average yield over the last five years.
Since the trust started paying dividends in 2011, the total annual dividend distribution rose every year. The annual dividend payout grew at an average rate of 41.8% every year, which resulted in a near six-fold growth over the past seven years.
While the share price experienced some volatility and was not able to keep pace with the dividend growth, the share price did manage a small 5.4% gain over the last 12 months and a 47% growth over the past five years.
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