Shares of Kimco Realty (KIM - Free Report) gained 1.8% in yesterday’s regular trading session following the company’s announcement of third-quarter 2020 dividend of 10 cents per share, which it reinstated after a temporary suspension in May.
At a time when a number of REITs suspended dividend payments in light of the coronavirus pandemic that disrupted the macro economy and affected rent collections, this dividend approval, although denoting a 64.3% decline from the prior payment of 28 cents, comes as a relief for investors. The dividend will be paid out on Sep 24 to the company’s shareholders of record on Sep 10, 2020.
What is encouraging is that the company is experiencing improvement in footfall at its centers with the reopening of additional tenants, resulting in better rent collection and a lesser need for rent deferral agreements.
Management also noted that the company’s board will monitor its financial performance and intends to declare additional dividends on its common stock as it needed to maintain compliance with its REIT taxable income distribution requirements.
With respect to the reopening of properties, all the company’s shopping centers were open and operational at August-end with around 96% of tenants, based on the annualized base rent currently open, including those that are operating on a limited basis.
The company’s rent receipts improved with 85% collection of August base rents following 82% of July rents and 76% of June rents. Also, rent deferrals granted by the company are approximately only 2% of the base rent for August.
Notably, over the recent years, mall traffic has continued to suffer with e-commerce gaining market share from the bricks-and-mortar stores, and store closures and retailer bankruptcies becoming rampant. This raised concerns over the fate of cash flows of physical stores and landlords as the trend is considerably curtailing demand for the retail real estate space. This downside hugely affected Macerich (MAC - Free Report) and Taubman Centers (TCO - Free Report) besides major players like Simon Property (SPG - Free Report) and Kimco.
Also, there is likely to be no respite in the near term as the tough operating environment might continue to bother with dwindling footfall at retail properties amid social-distancing mandates and higher e-commerce adoption due to the coronavirus crisis. However, the reopening of the retail sector in several parts of the nation comes as a breather as tenants now stand in a better position to generate revenues and meet their rent payments, thereby reducing pressure on the retail landlords.
For Kimco too, reopening of additional tenants and higher footfall at its properties will lessen its concerns over rent collection and deferral payments. Particularly, in these uncertain times, having a grocery component has been the saving grace of retail REITs and Kimco has a superior-quality, mixed-use portfolio concentrated in the top U.S. markets with a significant portion of its rents derived from grocery-anchored centers.
Further, Kimco has also been making concerted efforts to bolster its financial flexibility to tide over the current challenging landscape. Evidently, at the end of second-quarter 2020, Kimco had more than $2.2 billion of immediate liquidity. This included full availability under its $2-billion unsecured revolving credit facility. In addition, the company has 320 unencumbered assets, which represents roughly 80% of its total NOI. With balance sheet strength and adequate capital resources, the company remains well poised to brave the current blues, sustain its dividend payment and ride the wave of opportunities stemming from market dislocations.
This presently Zacks Rank #3 (Hold) stock has depreciated 12.1% in the past three months against its industry’s increase of 2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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