), a real estate investment trust (REIT), has recently declared a
second quarter 2012 dividend of 33.75 cents per share, which is
payable on July 13, 2012 to shareholders of record as on June 22,
A steady dividend payout facilitates the long-term strategy of
Equity Residential to provide attractive risk-adjusted returns to
its stockholders. Investors looking for high dividend yields are
increasingly favoring REITs. Solid dividend payouts are arguably
the biggest enticement for REIT investors as the U.S. law requires
REITs to distribute 90% of their annual taxable income in the form
of dividends to shareholders.
Earlier, during fourth quarter 2010, Equity Residential
implemented a new dividend policy to better align the dividend
payout with its actual annual operating results and provide greater
transparency to investors. Under the new dividend policy, the
company aims to pay an annual cash dividend to the tune of 65% of
Normalized FFO (funds from operations) for the year.
Funds from operations, 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.
Consequently, Equity Residential intends to pay a quarterly
dividend of 33.75 cents per share for each of the first three
quarters of the fiscal year, with the remainder being paid in the
fourth quarter to bring the total payment for the year to
approximately 65% of Normalized FFO for the reported fiscal
Based in Chicago, Illinois, Equity Residential is the largest
fully integrated publicly traded multifamily REIT in the U.S. The
company has a portfolio of high-quality assets in some of the most
desirable markets across the country, which includes New York,
Boston, Washington D.C., Seattle, San Francisco and Los
With new supply remaining muted until late 2013 or 2014, we
expect the multifamily sector to remain comparatively stable in the
coming quarters, as renting has emerged as the only viable option
for customers who could not get mortgage loans or are unwilling to
buy a house at present.
However, the continuous acquisition spree of Equity Residential
involves significant upfront operating expenses with limited
near-term profitability. New properties usually take time to
generate revenues, and will continue to drag down margins till they
We presently have a Neutral recommendation on Equity
Residential, which currently has a Zacks #3 Rank that translates
into a short-term Hold rating. We also have a Neutral
recommendation and a Zacks #3 Rank for
), one of the competitors of Equity Residential.
EQUITY RESIDENT (EQR): Free Stock Analysis
UDR INC (UDR): Free Stock Analysis Report
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