Investing in dividend stocks is a great way for people nearing retirement and those currently in retirement to generate consistent and steady income for paying bills, traveling, paying for grandchildren’s education or just having fun. But buying solid dividend companies is not always easy.
One way to measure the performance of a company is to look at its five-year dividend record. Five years of substantial dividend growth can indicate quite a bit about a company’s performance through good and bad economies, along with its present earnings and future prospects.
Take a look at one real estate investment trust (REIT) with an extremely impressive five-year performance and see how much a $10,000 investment in March 2018 would be generating in dividends today.
American Homes 4 Rent Class A AMH is a residential REIT focused on purchasing, developing, renovating and leasing both used and new single-family homes as rental properties. American Homes 4 Rent began in 2012 and in 11 years has built a portfolio of 59,000 single-family units across 21 states. Its largest concentration of homes is in the Southeastern U.S., where population growth has been explosive. Its initial public offering (IPO) was in July 2013.
If you had purchased $10,000 worth of American Homes 4 Rent stock in March 2018 at a price of $19.28 per share, you would have received 518.67 shares. At the time, the quarterly dividend was 5 cents per share, and the annual dividend of 20 cents yielded 1% — not great for income investors in or near retirement.
Over the past five years, your shares would have appreciated by $11.74, and you would have collected $1.72 in dividends.
Your initial investment would now be worth $16,980.01, an increase of 69.8%, with an average annual total return of 11.17%.
If you had chosen to reinvest your dividends rather than collect them, your 518.67 shares would have grown to 548.63 shares. The initial $10,000 investment would now be worth $17,018.23 for an average annual return of 11.22%.
Between March 2018 and January 2023, American Homes 4 Rent raised its quarterly dividend in large increments. In March 2021, the dividend doubled from 5 cents to 10 cents, and in March 2022, the dividend was increased by 80% to 18 cents per share. There were no dividend suspensions nor cuts during that time — even during the worst days of the COVID-19 pandemic.
The rise of the dividends coincides with the substantial increases in American Homes 4 Rent’s revenue and funds from operations (FFO). In March 2018, its revenue was $258 million and FFO was 25 cents. As of the fourth quarter of 2022, revenue has grown to $380.93 million, an increase of 47.6%, and FFO is now 40 cents per share, a five-year increase of 60%. American Homes 4 Rent’s fourth-quarter occupancy rate was 97%.
On Feb. 10, American Homes 4 Rent announced a 22.2% dividend increase from 18 cents to 22 cents. The dividend is payable on March 31 for shareholders of record on March 15 and the ex-dividend date is March 14.
The present annual dividend of 88 cents now yields 2.8% on its most recent closing price of $31.02.
American Homes 4 Rent has a total return of 4.23% year to date.
Looking for a way to boost returns? Benzinga’s Real Estate Offering Screener has the latest private market investments with offerings available for both accredited and non-accredited investors.
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