Essex Property Trust (ESS) is trading around $146 versus its 52-week range of $121.48-$161.52. The stock trades with a dividend yield of 3.1%. Others in its peer group such as BRE Properties (BRE), and Equity Residential (EQR) yield 3.25%, and 2.4%, respectively.
The chart below compares share performance over the past year. “D”s mark dividends paid.
Fundamentals that support a dividend payout:
Essex Property has a strong balance sheet with $141 million in cash & marketable securities, and $270 million available for borrowings under its credit facilities. As of June 30th, 2012, total leverage is 30%, and the company is in compliant with all its debt covenants. Total leverage is a significant improvement from 2008, when leverage was 40%.
Although rents continue to increase in California, and Seattle, occupancy remains high in the range of 95-97%. There is still a high demand for rentals versus buying in the company’s markets.
In August, the company issued $300 million in unsecured debt, proceeds of which will be used to retire short-term debt, and pay down its mortgages. We like the company’s disciplined approach to maintain the investment grade status.
Essex has expanded its development pipeline to $1 billion, 50% of which is in joint ventures. This development pipeline allows for external growth in the next 2-5 years.
The company continues to show strong growth in same-store revenues and FFO. In Q2, same-store NOI increased 9.2% year-over-year, and core FFO/share was reported as $1.66, outperforming the peer group.
The company is expected to report Q3-2012 earnings on October 31st, 2012. We look forward to hearing any possible increase in dividend going forward.
Conclusion: Essex Property management has been very disciplined in improving the balance sheet, and expanding in growth markets. Management’s track record makes the dividend on the stock an attractive consideration for your portfolio.
