Shares of apartment giant Equity Residential (EQR 0.90%) have plunged more than 30% this year. That sell-off has driven the real estate investment trust's dividend yield up to 3.9%.

What's odd is that, while shares have tumbled on recessionary fears, the company isn't seeing any signs of an economic downturn impacting demand. That was evident in its third-quarter earnings. Because of that, the beaten-down dividend stock is starting to look really attractive for those seeking passive income.

Poised to keep growing

Equity Residential is having an exceptional year. The apartment REIT reported an impressive 19.5% increase in its normalized funds from operations (FFO) per share during the third quarter. Meanwhile, normalized FFO per share was up 18.9% through the first nine months, compared to the prior-year period.

The company is benefiting from its strategy of owning luxury apartments geared toward higher-income earners in major cities. CEO Mark Parrell noted that its "affluent resident base remains well employed with growing incomes."

The CEO stated that this is "creating strong demand to live in our desirable properties and driving outstanding financial results this quarter." The REIT is enjoying high occupancy rates (96%+) and strong rent growth (blended new and renewal rates are up double digits year to date), which are driving double-digit same-store revenue growth.

Despite all the talk of an impending recession, Equity Residential expects to continue producing strong results. Parrell stated in the third-quarter earnings release that: "The substantial embedded growth in our rent roll and our financially resilient and highly employable resident base leaves us well positioned to deliver above average results in 2023 despite likely macroeconomic turbulence."

Parrell pointed out that the company has a nice recessionary cushion, partly because many of its leases remain below prevailing market rates. That should allow Equity Residential to raise rates as existing leases expire, despite a potential downturn.

An even more attractive investment

Equity Residential's strong third-quarter showing and early visibility into the fourth quarter led the company to narrow its full-year guidance range. That still has the REIT on track to achieve the midpoint of its normalized FFO forecast at $3.53 per share.

With this year's sell-off driving the stock price to its current level of around $64.50 per share, Equity Residential trades at 18.3 times its FFO. That's significantly lower than the 27 times FFO it fetched to start this year.

The REIT also offers a much more attractive dividend yield. It's currently up to 3.9%, significantly more than its 2.7% dividend yield at the beginning of the year. Put another way, a $1,000 investment in Equity Residential can now generate about $39 of annual passive income, compared to $27 earlier this year. 

What makes that payout even more enticing is that Equity Residential should be able to continue growing its dividend payment. The REIT gave its investors a 3.7% raise earlier this year and has expanded its payout at a 6.4% compound annual rate since 2011.

Equity Residential can easily afford that higher dividend payment. It will pay out about 70% of its normalized FFO this year at the current rate. That's a conservative level, giving it lots of cushion while enabling it to retain earnings to help fund new apartment developments.

In addition, the REIT has a top-tier balance sheet, giving it additional financial flexibility. With FFO on track to grow next year, Equity Residential should have no problem giving investors another raise. Meanwhile, FFO and the dividend should keep rising in the future, driven by continued rent growth and the growing pipeline of apartment communities it has under development.

An enticing option for passive income seekers

Equity Residential's stock price has tumbled, despite the recession-resistant growth it sees ahead. Because of that, investors can buy shares at a more attractive valuation and higher dividend yield. That bigger payout makes it an enticing option for those seeking passive income since Equity Residential should be able to continue increasing its healthy payout in the future.