Boston Properties (BXP) lifts dividend by 15%, but offers a spotty dividend history

Boston Properties’ (NYSE:BXP) dividend was increased by a solid 15% on December 20th. Its overall yield is 2.41%. The firm started paying a dividend in 1997.

Boston Properties is an equity real estate investment trust (REIT). The company engages in the ownership and development of office properties throughout the northeast. The REIT firm’s primary locations are in Boston, Manhattan, Washington DC and also in San Francisco. The firm also controls undeveloped land totaling over 500 acres. Boston Properties was founded in 1970. The REIT owns over 150 office buildings, one hotel, and two residential properties.

Last week’s dividend increase was the first since September 2012. Boston Properties currently ranks 3rd in yield within the large cap REIT-office category. The quarterly dividend for the January payment will be $0.75 versus the prior year rate of $0.65 per share. Boston Properties Inc. is not a member of our Top 100 Dividend Stock List (see below).

The dividend will be paid at the new higher rate on January 30, 2017, to shareholders of record at close of business on December 30, 2016. Boston Properties is currently priced at $124.59. Listed in the table below are the quarterly dividend payments since 2010.

Date Quarterly Dividend
12/30/2016 0.75
9/28/2016 0.65
6/28/2016 0.65
3/29/2016 0.65
12/29/2015 1.9
9/28/2015 0.65
6/26/2015 0.65
3/27/2015 0.65
12/29/2014 5.15
9/26/2014 0.65
6/26/2014 0.65
3/27/2014 0.65
12/27/2013 2.9
9/26/2013 0.65
6/26/2013 0.65
3/26/2013 0.65
12/27/2012 0.65
9/26/2012 0.55
6/27/2012 0.55
3/28/2012 0.55
12/28/2011 0.55
9/28/2011 0.5
6/28/2011 0.5
3/29/2011 0.5
12/29/2010 0.5
9/28/2010 0.5
6/28/2010 0.5
3/29/2010 0.5

We examine Boston Properties upon our five key criteria, which include; 

Quantitative Analysis:

Category Value Score
Dividend Yield 2.41% 228
Dividend Growth (3 to 6 year avg) 2.35% 353
Forward P/E 46.21 377
S&P Financial Rating A- 120
Beta 0.90 100
Total Score   1,178

Additional quantitative information on P/S ratio and historical yield;

% Yield 3 Year Div. Growth Rate 6 Year Div. Growth Rate FFO 2016 P/FFO Ratio 10 yr P/FFO Low 10 yr P/FFO High 5 yr max Yield % 5 yr lowest Yield %
2.41% 0% 4.7% 5.90 21.1 11.4 37.8 1.80% 2.61%

Positives;

  • Boston Properties’ dividend yield is above that of the S&P 500 Index.
  • Boston Properties has paid out a dividend consecutively for the past 19 years.
  • Boston Properties maintains a beta of 0.90, lower than the average company.
  • Boston Properties maintains an excellent credit rating; A-. This is investment grade.

Negatives;

  • Boston Properties did not increase its dividend for four consecutive years until this year.
  • The firm competes in the office leasing industry, which has secular headwinds.
  • Its occupancy rate fell year-over-year.

Boston Properties issued its earnings data on October 25th. The company reported third-quarter funds from operations (FFO) of $1.43 per share compared with $1.41 a year ago. This was a rise of nearly 1.5% over last year’s levels.  Net income was $76.8 million for the quarter ended September 30, 2016, compared to $184.1 million for the prior year quarter. Funds from Operations (FFO) for the quarter ended September 30, 2016 were $219.6 million versus Q3 2015 results of $217.3 million. This was slightly above expectations.  The REIT firm’s portfolio consisted of 174 properties at approximately 47.7 million square feet.  There are now 8 properties under construction and/or redevelopment Occupied space for the 163 properties in service for Q4 2016 is 89.6%.

In regard to transactions during the quarter, the firm entered the Los Angeles market through its acquisition of a 49.8% interest in an existing joint venture that owns and operates Colorado Center located in Santa Monica, California.  The REIT also finalized the sale of a parcel of land within its Broad Run Business Park property located in Loudoun County, Virginia for a gross sale price of approximately $18.0 million.

Boston Properties’ guidance was updated downward for the full year 2016. Its new projected FFO per share for the full year 2016 to $5.97 – $5.99 per share from $5.92 – $5.99 per share. This is an increase of approximately $0.03 per share.  Occupancy trended down from last year’s impressive Q3 of 91.3%. Lower occupancy were blamed upon the Colorado Center in Los Angeles and in New York the real estate portfolio had additional supply, which affected occupancy.  The REIT firm’s management projected FFO of $6.05-$6.23 for full year 2017.  The firm does own very high standard properties in attractive markets within the office space segment. Its occupancy rates have primarily been stable and above competitors. But the concern is that the office space industry is in a downward trajectory as more people work from home and company’s offshore workers. Although it is a solid company within its unique REIT space, the firm’s dividend is below the high set in early 2014. The firm did pay a special cash dividend of $4.50 per common share on January 28, 2015 to shareholders. The decision to declare a special dividend was primarily a result of the sale of approximately $2.3 billion of assets in 2014. Thus the firm has a spotty history of dividend increases along with a price/FFO that is slightly above average. Boston Properties does not qualify as a member of our  Top 100 Dividend Stocks.  We prefer Ventas and Public Storage in the REIT sector. 

Boston Properties Inc. Dividend Yield Historical Chart (Click to enlarge)

 

Chart Explanation:  Dividend growth stocks may be viewed undervalued when the current yield is above historical readings for the past 5 years. 

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