Douglas Emmett Inc. (NYSE: DEI) has been in a strong uptrend since early February. This REIT holds 48 office properties and 9 multi-family properties in California and Hawaii. It currently returns a 2.47% yield in quarterly dividends, and has been raising dividends consistently year over year.
A quick analysis of the chart shows that the stock is likely in the 5th wave of the current uptrend. Initial analysis showed a potential Wave 5 top last week, however yesterday's strong action suggests that Wave 5 may actually be extending.
|DEI Showing 5th Wave Extension|
We are not interested in playing the possible Wave 5 extension, despite an attractive target. If Wave 5 is extending, then we'll wait for it to conclude and play Wave A to the downside. That has the potential to move a few points in a retrace of Wave 5 and will offer a better reward to risk ratio.
If, however, we do get a move to the downside early this week that takes us back to the $35 range, then we'll definitely play the bounce off Wave (c). There's a high probability is this environment that the subsequent impulse wave will be upward, at least until there are signs that the Fed is ready to consider interest rate hikes again, and the next Wave 1 has some excellent upward potential.
If you're adding this one to your watch list, here are a few points to consider:
- DEI reports earnings before the open on August 2nd. As always, use caution in that period since the trading session immediately following earnings is typically extremely volatile.
- While not yet announced, we expect DEI to go ex-dividend around September 27th, and we expect it to pay $0.22 per share.
- DEI has been consistently raising dividends every year, so look for a potential increase to either $0.23 or $0.24 per share in 1Q17.
- With a dividend yield of 2.47% currently, and given a projection of share price growth, that yield will decline over the remainder of the year. This means DEI will be very sensitive to interest rates. If the prospects for a rate hike in 2016 increase, expect that to have negative drag on DEI's share price.