Dividend Growth Stock Overview: Essex Property Trust

Essex Property Trust has properties in Washington State and California, including
the greater San Francisco region.
Photo courtesy Stefan Bock/flickr.com.

About Essex Property Trust

Essex Property Trust is a real estate investment trust that focuses on multifamily properties and communities. Essex owns 239 communities with a total of over 57,000 apartment units across Northern and Southern California, and the Greater Seattle area. The company also owns 4 commercial buildings consisting of a total of 325,000 square feet of space. Essex is headquartered in Palo Alto, CA and employs over 1,700 people.

Essex’s history dates back when George M. Marcus formed Essex Property Corporation in 1971. The company came public in June 1994 with 16 multifamily communities, and has raised dividends each year since then.

Essex expands through acquisitions in what it considers promising areas. Specifically, the company looks to buy and/or build in areas with regional populations of at least 1 million people and with natural or artificial limits to growth, such as local regulations on development and/or geography that puts limits the available supply of residential housing.

The company’s largest acquisition was its merger with BRE Properties in April 2014. As a result of the merger, BRE Properties became a wholly owned subsidiary of Essex, and Essex diluted the number of outstanding shares by 23.1 million. At the time of the merger, BRE Properties owned or had interest in 78 multifamily communities in California and the Greater Seattle region.

As noted above, Essex Property Trust is heavily exposed to the West Coast rental market and, in particular, the California rental market. The geographical concentration of Essex’s properties represents a risk to future company operations and expansion. The majority of Essex’s properties are garden-style communities; the average property has 240 units. Nearly half (47%) of Essex’s properties are located in the Los Angeles, San Diego and Santa Barbara regions. Another 31% are located in the Greater San Francisco region. Roughly 21% of the units are located in or near Seattle, Washington. In the 2014 annual report, the company reported the average occupancy rate for residential properties was over 95%.

Year-over-year numbers are greatly affected by the BRE merger; net assets were up 123% to $11.56 billion, net liabilities were up 70% to $5.40 billion, and shareholder’s equity was up 220% to $6.02 billion. Funds from operations (FFO) were nearly $465 million, an increase of 55% over 2013; FFO per share was $7.89 and core FFO per share was $8.54, an increase of 4.0% and 12.4%, respectively. Overall, the company reported an increase in revenues from 2013 to 2014 of 7.3%.

The company is a member of the S&P 500 index and S&P’s High Yield Dividend Aristocrats index, and trades under the ticker symbol ESS.

Essex Property Trust was admitted to the S&P 500 in April 2014, at the same time as the merger with BRE Properties. Once Essex has increased dividends for 25 consecutive years, S&P will classify the company as an S&P Dividend Aristocrat. Since Essex has made a conscious effort to increase the dividend each year for 21 years straight, I expect them to continue to do so. If they continue their record of dividend growth, Essex will meet the Dividend Aristocrat criteria at the end of 2019.

Essex Property Trust’s Dividend and Stock Split History

Essex Property Trust Dividend Growth

Essex Property Trust has grown its dividend payout each year since coming public in 1994.

Essex Property Trust has increased its annual dividends since being publicly listed in 1994. Since 2001, Essex has – with one exception in 2014 – announced dividend increases in the first quarter of the year, with the stock going ex-dividend at the end of March. In February 2015, Essex announced a 10.8% quarterly dividend increase to an annualized rate of $5.76. I’m anticipating Essex announcing its 22nd annual dividend increase in February 2016.

Despite the large dividend increase in 2015, past dividend increases have varied from double-digit gains to very low single digit increases, which I define here as less than 4%. From 2009 – 2011, Essex increased its dividend by a penny a quarter, which has impacted the company’s compounded annual dividend growth rate (CADGR). Over the last 5 years, Essex’s CADGR is 6.88%; over the last 10 years, its 5.92%; and over the last 20 years (since 1995), Essex has a CADGR of 6.34%.

Essex has not split its stock since coming public in 1994.

Over the 5 years ending on December 31, 2014, Essex stock appreciated at an annualized rate of 23.76%, from a split-adjusted $70.71 to $205.32. This significantly outperformed the 13.0% annualized return of the S&P 500 during this time.

Essex has not split its stock since coming public in 1994.

Over the 5 years ending on December 31, 2014, Essex stock appreciated at an annualized rate of 23.76%, from a split-adjusted $70.71 to $205.32. This significantly outperformed the 13.0% annualized return of the S&P 500 during this time.

Essex Property Trust’s Direct Purchase and Dividend Reinvestment Plans

Essex Property Trust has both direct purchase and dividend reinvestment plans. The dividend reinvestment plan allows for partial dividend reinvestment. Overall, the fee structure is not favorable for investors. When you invest for the first time, you’ll need to purchase at least $2,500 in Essex stock. The minimum for additional investments is $100. There is no fee to set up an account, but check purchases will be assessed a fee of $5; investments that are automatically deducted from your bank account will be assessed a fee of $1.50. Regardless of how you invest, Essex Property Trust pays all per share fees.

When you sell your shares in the plan, you’ll pay a fee of between $15 and $25 depending on the type of sell order you request, plus a 15-cent per share commission. Fees will be deducted from the proceeds of the sale.

Helpful Links

Essex Property Trust’s Investor Relations Website

Current quote and financial summary for Essex Property Trust (finviz.com)

Information on the direct purchase and dividend reinvestment plans for Essex Property Trust

 

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