Dividend stocks are a great way to let the power of passive income actively help you fund your daily life or pour the payments back into your portfolio to build your savings.
Some of the most reliable players in this arena are real estate investment trusts (REITs). These groups of income-generating properties come in many sizes and sectors, but all are required to pay at least 90% of their taxable income as dividends to shareholders.
That makes the 225 or so publicly traded REITs a great place to look for reliable providers of dividend income and good candidates for stock price appreciation to begin with. Among my favorites is Alexandria Real Estate Equity (ARE -0.38%).
This Pasadena, California-based provider of laboratory and related office space increased its quarterly dividend by $0.03 in May to $1.18. That extends his streak of annual raises to 13 years; If you buy about $5,000 at the current price of about $154 a share, you can expect those 32 shares to provide about $150 a year in annual income.
Now, let’s take a look at your business.
Alexandria focuses its business on what it calls innovation clusters in the North Carolina Research Triangle and markets in Seattle, San Francisco, San Diego, Boston, New York City and Washington, DC.
More than 1,000 tenants occupy the high-demand space, including many of the world’s best-known pharmaceutical and life sciences companies, such as modern (mRNA -2.69%)for whom Alexandria has just built a new headquarters in Cambridge, Massachusetts.
The REIT’s current portfolio of approximately 74 million square feet is growing rapidly, with approximately 7.8 million square feet of new space under construction or about to break ground, which will provide a nice revenue boost.
Alexandria Real Estate Equities is also doing very well so far this year at the register. Revenue increased 26.3% and 27.2% year over year during the first quarter and the first half of 2022, respectively. There’s more to come, with second-quarter rental rate increases of around 34%, setting a new record for the nearly 30-year-old company.
A depressed share price and a cheerful outlook
Now might be a particularly good time to buy some shares of this dividend machine. After doubling in 10 years to a high of around $223 a share at the end of the year, Alexandria’s shares have plunged more than 30%. That pushed the yield up around 3% and, with Wall Street estimating a price target of $186.25, a nice gain of around 20% from current levels, analysts give this stock a “moderate buy” rating.
Of course, we are talking about both dividend income and stock price. There are good reasons to believe that there are more advantages as well. Income investors have to like this from the company’s 2Q22 earnings release: “Our 56% FFO payout ratio for the three months ended June 30, 2022 allows us to continue to share in the growth in cash flows.” of cash from operating activities with our shareholders while also retaining a significant portion for reinvestment.” FFO stands for funds from operations and is an important measure of a REIT’s performance.
That potential for stock price appreciation and dividend earnings as the REIT expands its portfolio is why I view this as a buy-and-hold stock. I also plan to increase my participation in it.
Marc Rapport has positions in Alexandria Real Estate Equities. The Motley Fool has positions and recommends Alexandria Real Estate Equities. The Motley Fool recommends Moderna Inc. The Motley Fool has a disclosure policy.