Federal Realty Investment Trust (FRT) | Daily Alert July 16
A dividend king is a stock with 50 or more consecutive years of dividend increases. Federal Realty is a Real Estate Investment Trust, or REIT. It concentrates in high-income, densely-populated coastal markets in the US, allowing it to charge more per square foot than its competition. Federal Realty trades with a market capitalization of $6.5 billion today, with $950 million in annual revenue.
Federal Realty’s business model is to own real estate properties that it rents to various tenants in the retail industry. This is a difficult time for retailers, as competition is heating up from e-commerce players such as Amazon (AMZN) and many others. Mall traffic is declining, which has put pressure on many brick-and-mortar retailers. Conditions for retail real estate have become even more challenging due to the coronavirus, which has forced many stores to close.
Federal Realty’s competitive advantages include its superior development pipeline, its focus on high-income, high-density areas and its decades of experience in running a world-class REIT. These qualities allow it to perform admirably, and continue growing even in a recession.
The company reported first-quarter financial results on May 7th. Revenue of $232 million declined fractionally, while adjusted FFO-per-share of $1.50 declined 3.9% from the same quarter last year. The company collected 53% of April rent, and reported that about 47% of its commercial tenants are open and operating based on annualized base rent.
The company later updated investors that it collected 54% of rent in May, with 54% of its tenants open and operating as of June 1st.
In response to the coronavirus-related shutdowns, the company is boosting its liquidity to help it get through the coronavirus crisis. Federal Realty completed a $400 million term loan issue on May 6th, and a separate $400 million note issuance on May 9th. The company has approximately $2 billion in available liquidity consisting of cash on hand and its undrawn credit facility.
Federal Realty’s FFO did not decline on a year-over-year basis at any point in the past decade, a tremendously impressive feat given that the U.S. economy dealt with the Great Recession. And it should also be noted that the company operates in the highly cyclical real estate sector. The simple fact that it has such a consistent track record of steady FFO growth makes it one of the most desirable REITs in the market. We are forecasting 5.5% annualized FFO growth for the next five years.
Based on expected 2020 FFO-per-share of $5.73, Federal Realty stock trades for a price-to-FFO ratio of 14. Our fair value estimate for Federal Realty is a price-to-FFO ratio (P/FFO) of 15. We view Federal Realty stock as slightly undervalued. A rising P/FFO multiple could reduce shareholder returns by approximately 1.4% per year over the next 5 years.
However, expected annual FFO-per-share growth of 6.9%, plus the 5.2% dividend yield, lead to expected total annual returns of 9.8% per year over the next five years.
Ben Reynolds and Bob Ciura, Sure Dividend Newsletter, suredividend.com, email@example.com, 800-531-0465, July 9, 2020
LTC Properties, Inc. (LTC) | Daily Alert July 27
Westlake Village, California-based LTC Properties is a real estate investment trust that invests in senior housing and health care properties primarily through sale-leaseback transactions, mortgage financing and structured finance solutions, including mezzanine lending. LTC holds more than 200 investments in 28 states with 30 operating partners. The portfolio is comprised of approximately 50% seniors housing and 50% skilled nursing properties.
Funds from operations this year are expected to dip 3.9%, with revenue down 0.07% to $151.7 million. Discounts to historical valuations more than adequately reflect the tough year to be in the nursing home business. LTC trades at 12.3 times the next 12 months of expected funds from operations (FFO), 15.7% below the stock’s five-year average price/FFO multiple. It also trades 23.5% below its average price-to-sales ratio over the past five years.
LTC pays a monthly dividend at a rate of $0.19 per share. Earnings are due on July 30.
John Dobosz, Forbes Dividend Investor, www.newsletters.forbes.com, 212-367-3388, July 17, 2020
VICI Properties Inc. (VICI) | Daily Alert August 25
The market, ignoring the worsening pandemic news, rewarded stocks that beat analyst forecasts, even if those forecasts called for a 50% drop in earnings from last year. Despite all you hear about tech stocks, consumer discretionary stocks and utilities did the best in July.
An October 2017 spin-off from Caesars Entertainment, VICI owns gaming and hospitality properties, including Caesars Palace in Las Vegas that it leases to third party operators. VICI also owns four championship golf courses. VICI, growing mainly by acquisition, recently announced two significant new deals and more are probably on the way.
Analysts are forecasting 14% revenue growth, 7% EPS growth, and 12% dividend growth over the next 12-months.
VICI Properties reported June quarter FFO (adjusted) of $0.36 per share, $0.01 above analyst forecasts but down $0.02 vs. year-ago. Revenues were up 17% to $257.9 million.
Harry Domash, Dividend Detective, www.dividenddetective.com, 866-632-1593, August 5, 2020