Kimco Realty Stock: Buy Premium Assets At A Bargain Price (NYSE …

phrase buy the dip handwritten on night wet window glass surface

z1b

It hasn’t been that long since I last visited Kimco Realty (NYSE:KIM) in mid-January here, but it feels much longer, considering all that’s happened in economic news since then. In this article, I revisit the stock, highlight recent developments, and give an updated valuation and recommendation, so let’s get started.

Why KIM?

Kimco is one of the largest shopping center REITs in the U.S., alongside peer Regency Centers (REG). Unbeknownst to some, KIM is actually bigger than Federal Realty Investment Trust (FRT), one of the oldest REITs on the market today.

KIM’s properties are centered around high-barrier to entry Coastal markets as well as fast-growing Sunbelt markets and at present owns 532 properties comprising 91 million square feet of gross leasable area.

Those familiar with the company may know that KIM has vastly transformed itself over the past decade, in response to changing consumer tastes.

This includes disposing of lower quality properties in secondary markets and recycling the capital into higher quality properties in growth markets. In total, 84% of KIM’s annual base rent now comes from Coastal and Sunbelt markets.

This transformation is reflected by the fact that 81% of KIM’s annual base rent now comes from grocery-anchored properties, which are more e-commerce resistant. Longer-term, management targets an even higher 85% of ABR coming from grocery-anchored centers.

As shown below, KIM’s top tenants include household names with very strong credit ratings, including TJX Companies (TJX), The Home Depot (HD), Ross Stores (ROST), Whole Foods (AMZN), Kroger (KR), and Walmart (WMT).

kim stock

Investor Presentation

Meanwhile, KIM enjoys a high 96% occupancy rate, and is seeing strong demand from tenants, with 30% rent spread on new leases executed during the fourth quarter, contributing to 4.4% same-store NOI growth. KIM’s lease spreads have grown every quarter since late 2020 (30% spread in Q4 2022) and has picked up steam over the past 18 months. Looking forward, KIM stands to benefit from strategic portfolio positioning, as it seeks to add value to its last mile properties with mixed use, including apartment units.

kim stock

Investor Presentation

Meanwhile, it seems that the recent collapse of SVB Financial Group along with concerns around regional banks such as First Republic Bank (FRC) has spooked REIT investors, including those of KIM, as the stock is now trading toward the low end of its 52-week range, as shown below.

kim stock

KIM Stock (Seeking Alpha)

It seems, however, that the concerns are overblown, as KIM is obviously a non-bank with physical assets, and shouldn’t have problems tapping debt markets, as capital simply flowed from regional banks into the hands of large players like Bank of America (BAC) and JPMorgan Chase (JPM).

Moreover, there are signs that inflation is easing, as the February CPI report showed a sequential 0.3% rise in benchmark prices, which was lower than what many economists had expected.

Plus, the Fed responded to the recent implosion of a few banks with just a quarter point rate increase in the last meeting.

This all bodes well for REITs who stand to benefit from high tenant demand, as cost of debt looks to stabilize. Meanwhile, Kimco maintains a strong BBB+ rated balance sheet, which should help it to secure relatively low cost of debt funding. Over 99% of its debt is fixed rate and has a long weighted average remaining term of 9.5 years.

KIM also has £2.1 billion worth of liquidity and retains significant value in its Albertsons (ACI) stake, with 28 million shares valued at £600 million.

This all lends support to KIM’s 4.7% yield, which is well protected by a 59% payout ratio (based on Q4 FFO/share of £0.39). Considering all the above, KIM appears to be trading in value territory at the current price of £19.53 with a forward P/FFO of just 12.4. Analysts have a consensus Buy rating with a conservative price target of 23.54, which equates to a potential 25% total return over the next 12 months.

kim stock

Seeking Alpha

More conservative income investors seeking a higher yield may want to consider the Preferred Series M shares (NYSE:KIM.PM), which currently trades at £20.30, equating to a 19% discount to liquidation value.

KIM.PM currently offers a 6.5% yield, and the dividend is cumulative, which means that preferred investors will be paid any missed dividends before common shareholders are paid, should dividends be suspended.

Lastly, while KIM.PM is trading past its call date of 12/20/22, it’s unlikely that KIM will call back the shares in the current high interest rate environment, and even if the shares do get called back at £25, preferred investors will get an immediate capital appreciation from the current price.

Investor Takeaway

Kimco Realty is an attractive income play in the real estate sector with a 4.7% dividend yield and a BBB+ rated balance sheet.

It enjoys a high occupancy rate, strong rent spreads, and a conservative payout ratio.

KIM stock appears to be trading in value territory at the current price, setting up income investors for potentially highly rewarding returns.

Conservative income investors may want to pick the preferred shares, which come with a higher yield and a significant discount to liquidation value.

disneyland-paris listed on couponmatrix.ukgant listed on couponmatrix.ukgrenade listed on couponmatrix.ukla-coqueta listed on couponmatrix.uklaptop-outlet listed on couponmatrix.ukmyvegan listed on couponmatrix.uk
disneyland-paris listed on couponmatrix.ukMeet all your favourite Disney heroes with the holiday trip of a lifetime at Disneyland Paris. Our Disneyland Paris vouchers will help you make a saving on your big trip to the Disney Village itself, packed full of parades, musical numbers, bars, restaurants and merchandise shops. Strolling around the park are princes and princesses as well as the ultimate star of Disney, Mickey Mouse himself. So, whether you’re a child or child at heart, you’ll love the magical feeling that Disneyland Paris possesses.
gant listed on couponmatrix.ukClassic American style can find its way into your wardrobe, with designer apparel available from GANT. From stylish swimwear to swanky socks, cool cords to silky scarves, there’s something for everyone, so grab a GANT discount code and start saving today. Kit yourself out with a great range of designer American sportswear and cutting-edge fashion, courtesy of GANT, so start shopping today and get yourself a stylish new wardrobe.
grenade listed on couponmatrix.ukThanks to ten years of hard work and research, Grenade blew a crater in the world of UK weight loss, filling it with the finest foodstuffs and supplements to help hundreds of gym-goers knock the pounds down. Whether you’re a runner or a weightlifter, a Grenade discount code is all you need to snatch up carb-cutting protein bars, weight loss shakes and daily capsules at a fraction of the price, so you can concentrate on the work that really matters.
la-coqueta listed on couponmatrix.ukImbuing that classic Spanish flair into enduring articles of clothing that are as beautiful as they are elegant. With an inventory that sports timeless looks for boys and girls from baby age up to ten years old, parents are sure to find the perfect threads for their child at top value with a La Coqueta discount code. Demonstrating a fashion that’s versatile to match the many rollercoasters of a child’s daily life, La Coqueta only becomes redundant once your kid outgrows their wardrobe.
laptop-outlet listed on couponmatrix.ukTop-notch computing doesn’t have to cost you a king’s ransom at Laptop Outlet, the online hub for new and refurbished computers both big and small. Whether you lean more toward Windows or Apple, a Laptop Outlet discount code guarantees a great deal on your digital device of choice. Hosting a helpful array of tablets, smartphones and accessories to support its phenomenal variety of laptops, desktops and notebooks, there’s no nifty gadget that can’t be made yours for less at Laptop Outlet.
myvegan listed on couponmatrix.ukFor the forward-thinkers of tomorrow, Myvegan supplies top-quality supplements, proteins and snacks through sustainable, eco-conscious practices. From delectable gooey cookies to packed proteins perfect before a workout, save on your favourite vegan-friendly of product of choice using a Myvegan discount code from Groupon. Getting a nutritious diet doesn’t have to be a hassle, instead enjoy delightful alternatives with Myvegan.