Dj Regency Centers Corp. Stock Outperforms Competitors On Strong Trading Day

Shares of Kimco Realty KIM have gained 30.9% in the past six months compared with its industry’s rally of 15.6%.

This Jericho, NY-based retail real estate investment trust (REIT) is well-poised to benefit from its portfolio of premium shopping centers, predominantly grocery-anchored, in the drivable first-ring suburbs within key major metropolitan Sunbelt and coastal markets. Its focus on developing mixed-use assets and a healthy balance sheet position bode well for long-term growth.

Last month, the company reported third-quarter 2024 funds from operations (FFO) per share of 41 cents, beating the Zacks Consensus Estimate by a penny. The metric grew 7.5% from the year-ago quarter. Results reflected a year-over-year rise in revenues.

Analysts seem bullish on this Zacks Rank #2 (Buy) company. The Zacks Consensus Estimate for its 2024 FFO per share grew one cent in the past week to 42 cents.

Let’s find out the factors behind the surge in the stock price.

Strategic Location of KIM

Kimco’s properties are located in the drivable first-ring suburbs within key major metropolitan Sunbelt and coastal markets. Particularly, 82% of the annual base rent (”ABR”) comes from its top major metro markets. Given the strategic location of its properties, it is likely to witness healthy demand in the near term, boosting leasing activity.

KIM’s Diversified Tenant Base

Kimco enjoys a diverse tenant base, led by a healthy mix of essential, necessity-based tenants and omni-channel retailers. National/regional tenants accounted for 81% of KIM’s pro rata ABR as of the end of the third quarter of 2024. Given the strength of its retailers with a developed omnichannel presence, the company is likely to be able to generate stable cash flows.

Focus to Develop Grocery-Anchored Centers & Mixed-Use Assets

During uncertain times, the grocery component saved the grace of the retail REITs. As of Sept. 30, 2024, Kimco achieved 84% ABR from the grocery-anchored portfolio from 78% in 2020. KIM has set a target to reach 85% of its ABR from this segment.

In the third quarter of 2024, Kimco witnessed 55 consecutive quarters of positive leasing spreads, indicating solid pricing power across its high-quality portfolio. Given the necessity-driven nature of the company’s grocery-anchored portfolio, it is likely to continue witnessing healthy leasing activity in the upcoming period and remains well-positioned to tide over challenging times.

The company also emphasizes mixed-use assets clustered in strong economic metropolitan statistical areas. The mixed-use assets category is benefiting from the recovery in both the apartment and retail sectors.

KIM’s Opportunistic Investment Policy

Kimco has been following an opportunistic investment policy to enhance its overall portfolio quality. This includes divesting its joint venture assets and using the proceeds to fund acquisitions and development and redevelopment projects. In the first nine months of 2024, the company disposed of 11 operating properties and seven land parcels in separate transactions for an aggregate sales price of $254.1 million.

The acquisition of RPT in January 2024 has benefited the company by increasing scale in high-growth target markets and preserving balance sheet strength. The company is expected to achieve its 2024 acquisitions range of $565 million to $625 million, including structured investments.

KIM’s Solid Balance Sheet Position

Moreover, Kimco maintains a solid balance sheet position. It exited the third quarter of 2024 with $2.8 billion of immediate liquidity. Its consolidated weighted average debt maturity profile is 8.3 years. It also enjoys investment-grade ratings of A- from Fitch, BBB+ from S&P and Baa1 from Moody’s, rendering it favorable access to the debt market. With a healthy financial footing, KIM is well-positioned to capitalize on long-term growth opportunities.

Risks Likely to Affect KIM’s Positive Trend

A rise in e-commerce adoption and efforts of online retailers to go deeper into the grocery business are concerns. Kimco faces competition from several real estate companies and developers who compete with the company for leasing space in shopping centers for tenants. This may affect the company’s ability to raise rental rates, including renewal rates and fill up vacancies.

Stocks to Consider

Some other top-ranked stocks from the retail REIT sector are Tanger Inc. SKT and Regency Centers REG, each currently carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for SKT’s 2024 FFO per share stands at $2.10, indicating an increase of 7.1% from the year-ago reported figure.

The Zacks Consensus Estimate for REG’s 2024 FFO per share is pinned at $4.24, suggesting year-over-year growth of 2.2%.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

Zacks Investment Research

Delighting its shareholders, Regency Centers Corporation REG has announced a 5.2% increase in its quarterly common stock dividend to 70.5 cents. This marks its 11th successive year of increases. The increased amount will be paid out on Jan. 3, 2025 to shareholders on record as of Dec. 16, 2024.

Reflecting positive sentiments, shares of Regency were up more than 1% during yesterday’s trading session.

The latest dividend rate marks an annualized amount of $2.82 per share compared with the prior rate of $2.68. Based on the company’s share price of $73.87 on Nov. 7, the latest hike results in a dividend yield of 3.82%.

Solid dividend payouts are the biggest attraction for REIT investors, and Regency is committed to boosting shareholder wealth. This retail REIT has steadily grown dividends per share since 2014 and maintained dividend payments through the COVID-19 pandemic. From 2014 through 2023, the company’s dividend witnessed a CAGR of 3.8%. In the last five years, REG has increased its dividend five times and has a five-year annualized dividend growth rate of 3.29%. Check Regency Centers’ dividend history here.

REG’s Business Model Supports Sustainable Dividend Payment

The latest hike reflects Regency’s ability to generate decent cash flow through its operating platform and high-quality portfolio. It has a high-quality open-air shopping center portfolio, with more than 80% grocery-anchored neighborhood and community centers. This focus on building a premium portfolio of grocery-anchored shopping centers is a strategic fit because such centers are usually necessity-driven and attract dependable traffic.

In uncertain times, the grocery component has benefited retail REITs, and Regency has numerous industry-leading grocers such as Publix, Kroger KR, Albertsons Companies, TJX Companies, Inc. TJX and Amazon/Whole Foods as tenants. Six of Regency’s top 10 tenants are high-performing grocers. The focus on necessity, service, convenience and value retailers serving the essential needs of the communities provides Regency with a strategic advantage.

Regency’s premium shopping centers are situated in affluent suburban areas and near the urban trade areas where consumers have high spending power. This enables the company to attract top grocers and retailers.

Regency also came up with solid results recently, reporting third-quarter 2024 NAREIT funds from operations (FFO) per share of $1.07, outpacing the Zacks Consensus Estimate of $1.04. The figure increased 4.9% from the prior-year quarter. Results reflected healthy leasing activity and a year-over-year improvement in the same property's net operating income (NOI) and base rents. The company raised its 2024 outlook.

Regency maintains a healthy balance sheet position, and as of Sept. 30, 2024, this retail REIT had nearly $1.5 billion of capacity under its revolving credit facility. As of the same date, its pro-rata net debt and preferred stock to operating EBITDAre was 5.2X. The company’s investment-grade credit ratings of A3 and BBB+ from Moody’s and S&P Global, respectively, render it access to the debt market at favorable costs. With low leverage, limited near-term maturities and a large pool of unencumbered assets, the company remains well-poised to meet its obligations and bank on growth scopes.

REG: In a Nutshell

With a solid operating model and a healthy financial position, we expect the latest dividend rate to be sustainable.

Over the past six months, shares of this Zacks Rank #2 (Buy) company have rallied 24.5%, outperforming the industry’s growth of 12.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.

Zacks Investment Research