If you’re an income investor, chances are you like having dividend-paying stocks in your portfolio with dividends that increase exponentially over time. But not all dividend-paying stocks have substantial dividend growth. It takes continued earnings growth to allow a company to continue to increase its dividend without having difficulty paying its shareholders.
Take a look at three real estate investment trusts (REITs) that have experienced superb dividend growth over the past five years, putting them well ahead of other REITs in this regard:
CTO Real Estate Growth Inc. (NYSE: CTO) is a Daytona Beach, Florida-based diversified REIT that owns and operates 23 retail, office and mixed-use properties. Of the 23 properties, 15 are multi-tenant and eight are single-tenant. Its lease occupancy rate as of March 31 was 93.5%.
In August 2018, CTO Realty paid a nominal quarterly dividend of just $0.016 per share. But over the next 10 quarters, it increased its dividend eight times to $0.3943 in March 2021. CTO Realty then cut the dividend to $0.333 but has since increased it three times to its current amount of 0. $.38 per share. This is an increase of 2,364% in less than five years.
On April 27, CTO Realty announced its first quarter operating expenses. Funds from operations (FFO) of $0.43 per share was up sharply from $0.16 in Q1 2022. Revenue of $24.72 million was 42.62% higher than revenue of $17.21 million in the first quarter of 2022.
While this is impressive earnings and dividend growth, one caveat now is that CTO Realty’s Core FFO 2023 guidance range is $1.50 to $1.55. The annual dividend of $1.52 gives CTO Realty an FFO payout ratio close to 100%. Best-case scenario, it probably won’t increase dividends anytime soon, and worst-case scenario, another dividend cut is possible if FFOs decline over the next few quarters.
For now, the excellent first quarter results and the 9.5% dividend yield are both positive for CTO Realty going forward.
Innovative Industrial Properties Inc. (NYSE: IIPR) is a Park City, Utah-based diversified/industrial REIT that specializes in triple net leases and sale-leasebacks on commercial properties with cannabis companies as the sole tenants.
As of December 31, 2022, Innovative Industrial Properties owned 110 properties in 19 states. The average lease term is 15.5 years. Its real estate mix is 91% industrial, 3% commercial and 6% industrial/commercial.
Five years ago, Innovative Industrial paid a quarterly dividend of $0.25 per share. But since then, the dividend has increased 13 times to $1.80 per share. That’s a 620% increase in five years.
There is one caveat with Innovative Industrial – the stock is quite volatile. Over the past five years, the stock rose from $26 to $263 before falling back to its current level near $68. Innovative Industrial has a dividend yield of 10.62% and a payout ratio of 88.4%. While this REIT has achieved extraordinary results, the volatility may not be suitable for more conservative income investors.
American Homes 4 Rental (NYSE: AMH) is a Calabasas, California-based residential REIT focused on buying, developing, renovating and leasing used and new single-family homes as rental properties. American Homes 4 Rent started in 2012 and over 11 years has built a portfolio of 57,878 single-family units in 21 states. Its greatest concentration of homes is in the southeastern United States, where population growth has been explosive. Its initial public offering (IPO) took place in July 2013.
Since May 2018, American Homes 4 Rent has increased its dividend three times, from the original $0.05 to the current $0.22 per share. That’s a 340% increase in five years without any suspensions or reductions, even at the worst of the COVID-19 pandemic.
On May 4, American Homes 4 Rent reported its first quarter operating results. FFO of $0.41 per share exceeded estimates by a penny and represented a 7.89% increase from FFO of $0.38 in the first quarter of 2022.
The annual dividend of $0.88 per share is well covered with an FFO payout ratio of 55%. Although American Homes 4 Rent’s dividend yield is only 2.66%, its dividend growth and earnings continue to be impressive.
Over the past five years, private market real estate investments have outperformed the publicly traded REIT market by approximately 50%. Check out Benzinga’s real estate deal finder for the latest passive real estate investments.
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This article 3 REITS with Best Dividend Growth Rates Over the Last 5 Years originally appeared on Benzinga.com
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