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Here's Why You Should Hold on to Kimco (KIM) Stock for Now
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Kimco Realty (KIM - Free Report) is making efforts to concentrate its open-air center assets in key retail destinations across the United States. This will likely enhance the company’s portfolio. However, continued asset disposition is expected to hinder bottom-line performance.
For third-quarter 2017, Kimco’s adjusted funds from operations (FFO) of 38 cents surpassed the Zacks Consensus Estimate by a cent. Concurrent with its third-quarter earnings release, Kimco announced a quarterly cash dividend of 28 cents, which reflects a 3.7% sequential hike. Given the company’s healthy financial position and lower debt-to-equity ratio compared to that of the industry, this dividend payout is anticipated to be sustainable.
In order to achieve an optimal portfolio, Kimco is shifting its focus to the small-shops portfolio. The small-shops portfolio enjoys frequent customer traffic and is Internet-resistant. This diversification will help Kimco limit its operating and leasing risks.
The company is also making solid progress to achieve its 2020 Visions, which outlines the concentration of assets in primary markets and a reduction in joint ventures. The company is channelizing the proceeds from portfolio reduction to Signature Series assets which offer scope for redevelopment. In fact, since 2010, the company has reduced its portfolio size from more than 900 assets to 508 assets by disposing real estate worth more than $6 billion. Such strategic measures are projected to drive Kimco’s bottom line in the long term.
While such aggressive dispositions are aimed at simplifying its business structure, the dilution of earnings in the short term cannot be bypassed. In fact, during the recently-reported quarter, Kimco sold five non-core assets for $62 million and is expected to close another 19 dispositions by the end of the year.
Further, it is revitalizing assets that are accretive for long-term growth by investing in development and redevelopment projects. Recently, the company announced its plan to redevelop the Owings Mills Mall into an open-air shopping center — Mill Station. (Read more: Kimco Announces Plans to Refurbish Owings Mills Mall). However, these projects typically have a long gestation period and also expose the company to various risks such as rising construction costs, entitlement delays and lease-ups in the near term.
Also, shift in consumers’ shopping preferences and pattern, and shrinking footfall at the brick-and-mortar outlets amid the e-commerce boom continue to thwart the performance of this retail real estate investment trust (REIT). Retailers that are not being able to cope with competition are shutting doors as well as filing bankruptcies.
Amid the gloomy retail environment, shares of Kimco have underperformed the industry it belongs to, year to date. During this time frame, shares of the company have declined 27.3%, whereas the industry registered 9.6% growth.
Clipper Realty’s 2017 funds from operations (FFO) per share estimates remained unchanged at 38 cents in a month’s time. Year to date, its share price has dipped 24%.
Extra Space Storage’s FFO per share estimates for the current year have moved up to $4.33 in a week’s time. Its shares have gained 10.3%, year to date.
Urstadt Biddle Properties’ FFO per share estimates for the current year remained unchanged at $1.25 over the last 60 days. Its share price has declined 2.5%, year to date.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.
Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Image: Bigstock
Here's Why You Should Hold on to Kimco (KIM) Stock for Now
Kimco Realty (KIM - Free Report) is making efforts to concentrate its open-air center assets in key retail destinations across the United States. This will likely enhance the company’s portfolio. However, continued asset disposition is expected to hinder bottom-line performance.
For third-quarter 2017, Kimco’s adjusted funds from operations (FFO) of 38 cents surpassed the Zacks Consensus Estimate by a cent. Concurrent with its third-quarter earnings release, Kimco announced a quarterly cash dividend of 28 cents, which reflects a 3.7% sequential hike. Given the company’s healthy financial position and lower debt-to-equity ratio compared to that of the industry, this dividend payout is anticipated to be sustainable.
In order to achieve an optimal portfolio, Kimco is shifting its focus to the small-shops portfolio. The small-shops portfolio enjoys frequent customer traffic and is Internet-resistant. This diversification will help Kimco limit its operating and leasing risks.
The company is also making solid progress to achieve its 2020 Visions, which outlines the concentration of assets in primary markets and a reduction in joint ventures. The company is channelizing the proceeds from portfolio reduction to Signature Series assets which offer scope for redevelopment. In fact, since 2010, the company has reduced its portfolio size from more than 900 assets to 508 assets by disposing real estate worth more than $6 billion. Such strategic measures are projected to drive Kimco’s bottom line in the long term.
While such aggressive dispositions are aimed at simplifying its business structure, the dilution of earnings in the short term cannot be bypassed. In fact, during the recently-reported quarter, Kimco sold five non-core assets for $62 million and is expected to close another 19 dispositions by the end of the year.
Further, it is revitalizing assets that are accretive for long-term growth by investing in development and redevelopment projects. Recently, the company announced its plan to redevelop the Owings Mills Mall into an open-air shopping center — Mill Station. (Read more: Kimco Announces Plans to Refurbish Owings Mills Mall). However, these projects typically have a long gestation period and also expose the company to various risks such as rising construction costs, entitlement delays and lease-ups in the near term.
Also, shift in consumers’ shopping preferences and pattern, and shrinking footfall at the brick-and-mortar outlets amid the e-commerce boom continue to thwart the performance of this retail real estate investment trust (REIT). Retailers that are not being able to cope with competition are shutting doors as well as filing bankruptcies.
Amid the gloomy retail environment, shares of Kimco have underperformed the industry it belongs to, year to date. During this time frame, shares of the company have declined 27.3%, whereas the industry registered 9.6% growth.
Kimco currently carries a Zacks Rank #3 (Hold).
Key Picks
Better-ranked stocks in the real estate investment trust space include Clipper Realty (CLPR - Free Report) , Extra Space Storage (EXR - Free Report) and Urstadt Biddle Properties . All three carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Clipper Realty’s 2017 funds from operations (FFO) per share estimates remained unchanged at 38 cents in a month’s time. Year to date, its share price has dipped 24%.
Extra Space Storage’s FFO per share estimates for the current year have moved up to $4.33 in a week’s time. Its shares have gained 10.3%, year to date.
Urstadt Biddle Properties’ FFO per share estimates for the current year remained unchanged at $1.25 over the last 60 days. Its share price has declined 2.5%, year to date.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.
Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Click here to see them >>