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12 US REITs flagged as candidates for dividend increases

Among publicly traded U.S. equity REITs, 12 companies appear best-positioned to increase dividends in the coming year, based on estimated AFFO payout ratios, among other factors.

Of the publicly traded U.S. equity REITs paying regular dividends between Jan. 1, 2015, and Dec. 30, 2016, 120 companies raised dividends during that period, including 10 out of 12 industrial REITs and 13 out of 18 shopping center REITs. A total of 115 REITs raised their dividends in 2016.

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Between Jan. 1, 2015, and Dec. 30, 2016, 73 companies did not raise their dividends. To identify companies that could be potential candidates to raise their dividends, S&P Global Market Intelligence first narrowed its analysis to those companies that were actively paying regular dividends during the period. Companies that completed IPOs or initiated dividend payments in 2016 and companies that had cut or suspended their dividends since the start of 2015 were excluded from the analysis.

The remaining candidates were sorted by their estimated AFFO payout ratios for 2017. AFFO payout ratios represent a company's dividend payments relative to estimated funds available for distribution, and therefore, lower payout ratios suggest a greater capacity for a company to increase its regular dividend.

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With the lowest 2017 AFFO payout ratio estimate, at 21.3%, single family REIT American Homes 4 Rent comes out on top of the chart of potential dividend increase candidates. Analysts expect American Homes 4 Rent to grow AFFO in 2017 by 12.6%. However, the company, which also led last year's increase candidates list, has not bumped its quarterly 5-cent-per-share dividend since its IPO in July 2013.

Cedar Realty Trust Inc.. also remains as the second most likely increase candidate since last year's analysis, with a 2017 AFFO payout ratio estimate of 42.6%. The shopping center REIT, however, has not raised its dividend in several years, maintaining its quarterly distribution of 5 cents per share since Feb. 21, 2012.

Ashford Hospitality Trust Inc. and CBL & Associates Properties Inc. have 2017 AFFO payout estimates as of Jan. 10 of 49.0% and 58.7%, respectively. Hotel REIT Ashford Hospitality Trust began paying regular quarterly cash dividends of 12 cents per share in April 2013, while regional mall REIT CBL & Associates announced its 26.50-cent-per-share dividend on Nov. 13, 2014. Supplementing its regular dividends, Ashford Hospitality Trust's payouts since April 15, 2013, have included three special dividends totaling approximately $5.55 per share.

Last year's analysis identified 10 candidates for increases, of which four companies subsequently raised their dividends in 2016. Empire State Realty Trust Inc. bumped its dividend by 2 cents to 10.5 cents per share, while Boston Properties Inc. raised its quarterly dividend by 10 cents to 75 cents per share.

Kilroy Realty Corp. lifted its quarterly dividend to 37.5 cents per share from 35 cents per share, which it had been paying since July 17, 2009. Brandywine Realty Trust raised its dividend by 1 cent to 16 cents per share.

Among companies excluded from the analysis due to suspended dividends were several small-cap REITs with market caps less than $100 million as of Jan. 10, as well as two companies with market caps over $1 billion.

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Equity Commonwealth is the largest publicly traded U.S. equity REIT that is not currently paying dividends on its primary common stock. The last dividend paid by the company was on Feb. 21, 2014.

The second largest company on the list, New York REIT, ceased paying regular monthly dividends following its announced plan to liquidate. New York REIT's last monthly dividend was paid on Oct. 14, 2016, and it now plans to pay periodic liquidation distributions instead.