Dividend Aristocrats In Focus: Essex Property Belief

Up to date on April twenty sixth, 2024 by Bob Ciura

Essex Property Belief (ESS) isn’t essentially a family identify with regards to dividend shares, however the true property funding belief, or REIT, has produced very spectacular progress previously twenty years.

The belief has managed to provide rising 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 bunch of S&P 500 shares with a minimum of 25 consecutive years of dividend will increase.

That listing is now as much as 68 firms which have confirmed to buyers they will pay – and enhance – their dividends in any financial local weather.

You’ll be able to obtain an Excel spreadsheet of all 68 Dividend Aristocrats, together with essential monetary metrics similar to P/E ratios and dividend yields, by clicking the hyperlink beneath:

Disclaimer: Certain Dividend will not be affiliated with S&P International in any manner. S&P International owns and maintains The Dividend Aristocrats Index. The knowledge on this article and downloadable spreadsheet is predicated on Certain Dividend’s personal overview, 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 data on this article or spreadsheet is official information from S&P International. Seek the advice of S&P International for official data.

Essex confronted some headwinds through 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 finally 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.

At this time, 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 secure 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.

Robust same-property income progress, pushed by wholesome lease will increase, contributed to this outcome. Whereas same-property bills additionally elevated, Essex targeted on operational effectivity by controlling these prices. The corporate maintained its excessive occupancy price 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 enormous participant within the markets the place it’s current, so progress may very well 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 gasoline the demand for housing provide.

As well as, single-family residences are very costly in these markets, making renting extra enticing.

Supply: Investor Presentation

These markets have sturdy demand for rental items but in addition restricted new provide as undeveloped land is restricted, 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 might be modest however regular, including to the belief’s FFO-per-share within the years to come back by way of increased same-property income and NOI progress.

Aggressive Benefits & Recession Efficiency

Aggressive benefits are troublesome to come back by for a REIT, provided that so many opponents make use of primarily equivalent enterprise fashions.

Nonetheless, Essex has scale and measurement, in contrast to different condominium REITs, and a administration workforce that’s extremely expert in creating shareholder worth by way of 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 Customary & 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 have 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 honest worth at 16 instances FFO-per-share, which suggests shares are buying and selling precisely at our honest worth estimate. As such, Essex is pretty valued at current.

Due to this fact, future returns at this value might be derived from FFO progress and dividends. Together with the present dividend yield of 4%, and 4.7% forecasted FFO-per-share progress, we have now complete projected annual returns to shareholders of 8.7%.

Essex has paid rising dividends for 30 consecutive years. Dividend progress buyers seemingly discover this a pretty high quality, and we count on Essex to proceed to boost the payout annually for the foreseeable future.

Last 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 workforce 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 price ESS inventory a maintain.

In case you are focused on discovering extra high-quality dividend progress shares appropriate for long-term funding, the next Certain Dividend databases might be helpful:

The foremost 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: