Up to date on April twenty sixth, 2024 by Bob Ciura
Essex Property Belief (ESS) isn’t essentially a family identify relating to dividend shares, however the actual property funding belief, or REIT, has produced very spectacular progress previously twenty years.
The belief has managed to supply growing dividends since its IPO in 1994. In all, Essex has elevated its dividend for 30 consecutive years.
It’s now a member of the Dividend Aristocrats, a gaggle of S&P 500 shares with at the very least 25 consecutive years of dividend will increase.
That listing is now as much as 68 corporations which have confirmed to buyers they’ll pay – and enhance – their dividends in any financial local weather.
You possibly can obtain an Excel spreadsheet of all 68 Dividend Aristocrats, together with necessary monetary metrics comparable to P/E ratios and dividend yields, by clicking the hyperlink beneath:
Disclaimer: Certain Dividend isn’t affiliated with S&P International in any means. S&P International owns and maintains The Dividend Aristocrats Index. The data on this article and downloadable spreadsheet is predicated on Certain Dividend’s personal evaluate, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person buyers higher perceive this ETF and the index upon which it’s based mostly. Not one of the info on this article or spreadsheet is official information from S&P International. Seek the advice of S&P International for official info.
Essex confronted some headwinds in the course of the coronavirus pandemic of 2020, however the firm has made massive strides in its ongoing restoration.
In the meantime, the inventory has a 4.0% yield, a management place in its core markets, and potential for progress up forward.
Enterprise Overview
Essex is a Actual Property Funding Belief, or REIT. It began in 1971 as a small actual property firm and ultimately went public in 1994.
At the moment, Essex had grown to 16 multifamily communities as a totally built-in REIT that acquires, develops, redevelops, and manages multifamily condominium communities situated in supply-constrained markets.
Right this moment, Essex is targeting the West Coast of the U.S., together with cities like Seattle and San Francisco.
Supply: Investor Presentation
The corporate reported its earnings outcomes for the fourth quarter of 2023 on February sixth. Essex ended 2023 with strong This fall outcomes, showcasing steady efficiency in a difficult actual property market.
Core FFO (Funds From Operations), a key metric for REITs, got here in at $3.83 per share, exceeding analysts’ expectations.
Sturdy same-property income progress, pushed by wholesome lease will increase, contributed to this consequence. Whereas same-property bills additionally elevated, Essex centered on operational effectivity by controlling these prices. The corporate maintained its excessive occupancy charge of 96.1%.
Progress Prospects
We see Essex producing 4.7% annual FFO-per-share progress within the subsequent 5 years. Essex has reached the purpose the place it’s a large participant within the markets the place it’s current, so progress could possibly be harder to come back by.
Essex concentrates on the markets on the West Coast due to favorable long-term rental prospects. That space has very excessive financial productiveness and powerful charges of job progress, each of which gas the demand for housing provide.
As well as, single-family residences are very costly in these markets, making renting extra engaging.
Supply: Investor Presentation
These markets have robust demand for rental items but in addition restricted new provide as undeveloped land is proscribed, and building is prolonged and costly.
Essex is current in two markets with persistent housing scarcity issues, which drives demand for its rental items over time. We predict this tailwind will probably be modest however regular, including to the belief’s FFO-per-share within the years to come back by way of greater same-property income and NOI progress.
Aggressive Benefits & Recession Efficiency
Aggressive benefits are tough to come back by for a REIT, on condition that so many rivals make use of primarily equivalent enterprise fashions.
Nevertheless, Essex has scale and measurement, not like different condominium REITs, and a administration group that’s extremely expert in creating shareholder worth via numerous strategies.
The corporate additionally has a powerful monetary place, offering it a aggressive benefit over its friends, who could also be in worse monetary form. Essex has a strong BBB+ credit standing from Normal & Poor’s.
On the identical time, web debt to adjusted EBITDA has been coming down since 2020.
Curiously, Essex carried out very nicely throughout and after the Nice Recession:
- 2007 FFO-per-share: $5.57
- 2008 FFO-per-share: $6.14
- 2009 FFO-per-share: $6.74
- 2010 FFO-per-share: $5.02
This speaks to the resilience of the markets the place it’s current, as 2020 and 2021 had been the one years previously decade the place FFO-per-share declined. We see this recession resilience as extremely favorable and provides to the inventory’s attractiveness.
Valuation & Anticipated Returns
At roughly the midpoint of 2024 FFO-per-share steerage ($15.22 per share), Essex is buying and selling for a a number of of 16. We see truthful worth at 16 occasions FFO-per-share, which suggests shares are buying and selling precisely at our truthful worth estimate. As such, Essex is pretty valued at current.
Due to this fact, future returns at this value will probably be derived from FFO progress and dividends. Together with the present dividend yield of 4%, and 4.7% forecasted FFO-per-share progress, we now have complete projected annual returns to shareholders of 8.7%.
Essex has paid growing dividends for 30 consecutive years. Dividend progress buyers seemingly discover this a lovely high quality, and we anticipate Essex to proceed to lift the payout annually for the foreseeable future.
Closing Ideas
Essex has undoubtedly been a world-class REIT because it went public and started paying dividends over a quarter-century in the past. The belief has favorable long-term demographics working in its favor and a administration group eager to unlock shareholder worth.
ESS inventory is interesting to buyers searching for dividend security and regular dividend progress over time. With complete returns anticipated at 8.7% yearly, we charge ESS inventory a maintain.
If you’re involved in discovering extra high-quality dividend progress shares appropriate for long-term funding, the next Certain Dividend databases will probably be helpful:
The key home inventory market indices are one other strong useful resource for locating funding concepts. Certain Dividend compiles the next inventory market databases and updates them month-to-month:
Thanks for studying this text. Please ship any suggestions, corrections, or inquiries to assist@suredividend.com.