Assessing the Sustainability of Equity Residential's Dividend
Equity Residential (EQR, Financial) recently announced a dividend of $0.66 per share, payable on 2024-01-12, with the ex-dividend date set for 2023-12-29. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Equity Residential's dividend performance and assess its sustainability.
What Does Equity Residential Do?
Equity Residential owns a portfolio of 304 apartment communities with around 80,000 units and is developing two additional properties with 537 units. The company focuses on owning large, high-quality properties in the urban and suburban submarkets of Southern California, San Francisco, Washington, D.C., New York, Seattle, and Boston.
A Glimpse at Equity Residential's Dividend History
Equity Residential has maintained a consistent dividend payment record since 1993. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Equity Residential's Dividend Yield and Growth
As of today, Equity Residential currently has a 12-month trailing dividend yield of 4.19% and a 12-month forward dividend yield of 4.25%. This suggests an expectation of increased dividend payments over the next 12 months. Over the past three years, Equity Residential's annual dividend growth rate was 3.30%. Extended to a five-year horizon, this rate increased to 4.30% per year. And over the past decade, Equity Residential's annual dividends per share growth rate stands at 3.20%.
Based on Equity Residential's dividend yield and five-year growth rate, the 5-year yield on cost of Equity Residential stock as of today is approximately 5.17%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, Equity Residential's dividend payout ratio is 1.50, which may suggest that the company's dividend may not be sustainable.
Equity Residential's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Equity Residential's profitability 7 out of 10 as of 2023-09-30, suggesting good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Equity Residential's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors. Revenue is the lifeblood of any company, and Equity Residential's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Equity Residential's revenue has increased by approximately 0.20% per year on average, a rate that underperforms than approximately 54.57% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Equity Residential's earnings increased by approximately -10.00% per year on average, a rate that underperforms than approximately 71.78% of global competitors. Lastly, the company's 5-year EBITDA growth rate of -5.60%, which underperforms than approximately 71.1% of global competitors.
Next Steps
In conclusion, while Equity Residential's dividend history reflects consistency, the current payout ratio raises questions about sustainability. The company's solid profitability rank and dividend yield growth are encouraging, yet the growth metrics present a mixed outlook with underperformance in revenue and earnings growth rates. Value investors should weigh these factors when considering Equity Residential's dividend prospects. For a broader investment strategy, GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
