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Ventas' (VTR) 2% Sequential Dividend Hike Cheers Investors

Ushering in good news for shareholders, Ventas’ VTR board of directors announced a 2% sequential hike in fourth-quarter 2017 common stock dividend. The revised dividend now comes in at 79 cents per share versus the previous figure of 77.5 cents. The new dividend will be paid on Jan 12, 2018 to shareholders of record as of Jan 2, 2018.

Based on the increased rate, the annual dividend comes to $3.16 a share, resulting in an annualized yield of 5%, considering Ventas closing price of $63.32 on Dec 11. For income tax purposes, the quarterly dividend will be included in the stockholders’ taxable income for 2018.

Solid dividend payouts are arguably the biggest enticement for real estate investment trusts (REIT) investors and this healthcare REIT had earlier announced a 6% hike in fourth-quarter 2016 dividend. Ventas continued to pay the raised dividends throughout 2017. Such investor friendly moves boost investors’ confidence in the stock.

Also, the company has an impressive record of dividend growth. In fact, it has raised dividends every year for more than a decade. Ventas has achieved a total increase of nearly 9% in dividends since fourth-quarter 2013. This highlights the company’s encouraging future outlook as well as its continued efforts to grow shareholders’ wealth.

Ventas’ financial health can be judged by its cash flow per share. The company churns cash flow per share of $4.35, significantly higher than the industry’s average of $2.27. Further, its current ratio indicates a decent liquidity position. A secure cash flow position will help the company sustain its dividend payout in the future.

Additionally, optimal utilization of equity has resulted in a return on equity (ROE) of 6.34%, while the industry has delivered 5.78%.

However, poor fundamentals of the company might lead to dividend cuts. The amount of debt assumed by a company influences the dividend growth and Ventas’ high level of debt raises concerns over the sustainability of the current dividend level. Ventas is a highly leveraged company with a debt/equity ratio of 1.06 as compared to the industry’s ratio of 0.84. Furthermore, its current cash flow growth of 12.9% is lower than the industry’s average of 15.9% and makes interest payments coverage difficult. This impedes the stock’s upside potential.

Year to date, shares of this Zacks Rank #4 (Sell) company have underperformed the industry. During the period, shares of Ventas have gained just 1.3%, while the industry has recorded growth of 6.1%.




Better-ranked stocks in the real estate investment trust space include Franklin Street Properties FSP, Columbia Property Trust CXP and MedEquities Realty Trust MRT. All three carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Franklin Street Properties’ funds from operations (FFO) per share estimates for 2017 remained unchanged at $1.05 over the past month. Its share price has increased 5.7% in three months’ time.

Columbia Property Trust’s FFO per share estimates for the current year have moved up to $1.15 in a month’s time. Over the past three months, the company’s shares have gained 4.7%.

MedEquities Realty‘s 2017 FFO per share estimates remained unchanged at $1.12 over the past month. Its shares have dropped 6.2% in the past three months.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, 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.

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MedEquities Realty Trust Inc. (MRT) : Free Stock Analysis Report
 
Ventas, Inc. (VTR) : Free Stock Analysis Report
 
Franklin Street Properties Corp. (FSP) : Free Stock Analysis Report
 
Columbia Property Trust, Inc. (CXP) : Free Stock Analysis Report
 
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