This year has been a challenging one for investors in Boston Properties. Its stock has fallen by about a third, pushing its dividend yield up to over 4%. The main factor weighing on the office REIT’s shares this year is concerns that the COVID-19 outbreak will cause more companies to allow their employees to work from home permanently.
However, while that’s the case in some notable instances, the work-from-home trend won’t crush Boston Properties, since 88% of U.S. workers prefer coming into the office five days a week, only down slightly from 90% before the pandemic. On top of that, companies prefer the office environment because it facilitates collaboration, creativity, mentorship, productivity, and creating culture. Because of that, most companies have continued to pay rent on their office space — Boston Properties collected 98% of June’s office rent — despite the impact of COVID-19 on their operations.
That excellent rental collection rate puts Boston Properties’ dividend on solid ground. Meanwhile, it compliments that factor by having a low dividend payout ratio — usually around 50% of its FFO — the highest credit rating among office REITs, and a cash-rich balance sheet. Those features give it lots of financial flexibility to make acquisitions and continue investing in development projects during the current market downturn.