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6 US REITs identified as candidates for dividend increases

An analysis by S&P Global Market Intelligence identified six U.S. real estate investment trusts as likely candidates for dividend increases.

The analysis included companies with steady regular dividend payments and excluded those that entered the publicly traded REIT space after Jan. 4, 2016, or that have decreased or suspended dividends since then.

The six candidates were then chosen based on estimated 2018 adjusted funds from operations payout ratios that are lower than 70%. As these payout ratios represent a company's dividend relative to estimated cash available for distribution, low payout ratios could indicate a company's capacity to increase its regular dividend.

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Single family REIT American Homes 4 Rent had the lowest estimated 2018 AFFO payout ratio of the potential candidates, at 20.6%. During the past two years, American Homes has expanded its portfolio while also boosting same-store net operating income levels by 8.8% in 2016 and 5.1% in 2017. Since its IPO in 2013, the company has paid out a steady 5-cent-per-share distribution each quarter and now has the lowest dividend yield of the candidates, 1%.

Ranking second on the list by payout ratio was Ashford Hospitality Trust Inc., with a ratio of 44.4%. Ashford Trust last increased its quarterly distribution in March 2013, raising it to 12 cents per share from 11 cents.

Shopping center REIT Cedar Realty Trust Inc. ranked third on the list, with an estimated 2018 AFFO payout ratio of 49.5%. Cedar is expected to grow its AFFO by 5.5% in 2018 and 4% in 2019. Cedar has paid out a steady quarterly distribution of 5 cents per share since cutting its dividend from 9 cents per share in 2012.

Nine REITs in the analysis are not paying out regular dividends and were excluded as candidates for increases.

Equity Commonwealth is the largest REIT by market capitalization in this group. The company suspended its dividend following the removal of its entire board of trustees on March 25, 2014.

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Of the 173 U.S. equity REITs that have traded publicly since 2016, 118 have increased their dividends. Year-to-date through March 1, 40 REITs had increased their payouts.

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Use S&P Global Market Intelligence's REIT Dividends Model to analyze REIT dividend trends and view historic dividends for U.S. equity REITs. Other templates are also available in the Template Library.