Equity Residential EQR finally declared an increase in its first-quarter dividend. The company would now pay 55.25 cents for the quarter, which reflects a hike of 10.5% from the prior dividend of 50 cents.

Notably, at the time of its fourth-quarter 2014 earnings release, the company had revealed its dividend policy, according to which it intended to pay 65% of the mid-point of its 2015 normalized funds from operations (“FFO”) guidance range of $3.35–$3.45 per share. That constitutes an annual dividend of $2.21 per share in 2015 and 55.25 cents for the quarter.   

This new dividend would be paid on Apr 10, 2015 to shareholders of record on Mar 23. At this new rate, annualized yield comes at 2.87% based on the stock’s closing price of $77.13 on Mar 12.

We believe that Equity Residential has adequate capacity to support its dividend policy. The company’s normalized FFO per share in fourth-quarter 2014 came in at 86 cents, exceeding the Zacks Consensus Estimate by 3 cents. The bottom line also surpassed the prior-year quarter figure by 9 cents.

Quarterly results at this apartment real estate investment trust (“REIT”) were primarily driven by higher same store net operating income (“NOI”) and NOI from non-same store properties presently in lease up, as well as lower G&A expenses.

Equity Residential’s concerted efforts toward repositioning its portfolio from low barrier-to-entry/non-core markets to high barrier-to-entry/core markets is expected to drive its top-line growth, going forward. Also, the echo boomers’ population and lifestyle transformation continue to raise demand for apartments. As such, we believe that the company remains well poised to raise its shareholders’ wealth.

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 Equity Residential, a number of other REITs have come up with dividend-hike announcements of late.

Among them are Taubman Centers Inc. TCO, Prologis Inc. PLD and Essex Property Trust Inc. ESS. While Taubman announced a 4.6% increase in its quarterly dividend rate to 56.5 cents per share, Prologis revealed a 9% hike in its dividend rate to 36 cents per share and Essex Property raised its quarterly dividend by 10.8% to $1.44 per share.

Equity Residential currently carries a Zacks Rank #2 (Buy). The company announced that its Annual Meeting of Shareholders would take place on Jun 24, 2015 in Chicago, IL.  

Note: FFO, 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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