Boston Properties (BXP) Hikes Dividend By 6.7%, Stock Up

Ushering in good news for its shareholders, office REIT Boston Properties (NYSE:BXP) announced a 6.7% hike in the company's quarterly cash dividend rate to 80 cents per share from 75 cents paid earlier. It will pay the raised dividend for the fourth quarter on Jan 30, 2018, to shareholders on record as of Dec 29, 2017.

Reflecting positive sentiments of investors, the shares inched up 1.2% during Monday’s regular trading session to $130.96.

Based on the increased rate, the annual dividend comes to $3.20 per share, up from the prior annual rate of $3.00 per share, leading to an annualized yield of 2.4%, considering Boston Properties' closing price on Dec 18.

Solid dividend payouts remain arguably the biggest enticement for REIT investors and Boston Properties remains committed toward boosting shareholders’ wealth. The company has registered a five-year annual dividend growth rate of 4.87%. Prior to this dividend hike, in December 2016, Boston Properties had announced a 15.4% hike in its quarterly dividend rate.

Boston Properties also has solid fundamentals to back dividend hikes. The company concentrates on a few select high-rent, high barrier-to-entry geographic markets that usually fare better in an uncertain economy. Moreover, growth in demand for office space continues to be fueled by technology and life science businesses.

The company has achieved an annual compounded revenue growth rate of 8.17% over the last five years. Given the company’s improving core operations, we anticipate this trend to continue, in the near future. In addition, the company is likely to experience solid contribution in 2018 from its non-same-property portfolio, mainly driven by development deliveries.

Also, with economic improvement and recovery in the job market, we expect healthy growth in demand for office spaces. This is because, as the economy revives, business grows and therefore, corporate sectors seek expansion, renting more space to accommodate the increased workforce.

Additionally, the company remains focused on maintaining strong balance sheet with conservative leverage position. It enjoys substantial liquidity of around $2.5 billion and solid access to debt markets. Also, reflecting optimal utilization of equity, the company’s ROE is 6.43%, higher than the industry average of 5.78%.

However, there is growth in supply of office space in the market and this remains a concern because higher supply usually leads to lesser absorption and also curtails the landlord’s capability to demand more rents. There is also a trend of increased concessions in some of the markets.

Shares of Boston Properties have outperformed the industry it belongs to in the past three months. This Zacks Rank #3 (Hold) company’s shares have rallied 9.5%, while the industry has increased 1.3% during the same time period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Apart from Boston Properties, a number of REITs have announced dividend hikes in recent times. Notable among them are Mid-America Apartment Communities, Inc. (NYSE:MAA) , Ventas, Inc. (NYSE:VTR) and SL Green Realty Corp. (NYSE:SLG) .

Mid-America Apartment Communities approved a 6% hike to its common dividend rate for fiscal 2018. Ventas raised the fourth-quarter 2017 dividend by 2% to 79 cents per share. Further, SL Green announced a 4.8% increase in its fourth-quarter dividend and will now pay a dividend of 81.25 cents per share.

Zacks Editor-in-Chief Goes "All In" on This Stock

Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.

Download it free >>

Mid-America Apartment Communities, Inc. (MAA): Free Stock Analysis Report

Ventas, Inc. (VTR): Free Stock Analysis Report

Boston Properties, Inc. (BXP): Free Stock Analysis Report

SL Green Realty Corporation (SLG): Free Stock Analysis Report

Original post

Zacks Investment Research