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Here's Why You Should Hold Taubman Centers (TCO) Stock Now

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Taubman Centers, Inc.’s solid portfolio of regional and super-regional malls, with presence in posh regions, and high-quality tenant roster will likely boost the company’s revenues, over the long run. Also, with the company’s ability to generate decent cash flows, its dividend payout seems sustainable.

Particularly, with a decent employment scenario and still-high consumer confidence, demand for retail goods is anticipated to be steady. This might send across positive-ripple effects across the industry.

The company is also focused on strategic expansions and redevelopments. In April, Taubman Centers acquired 48.5% interest of The Gardens Mall 0151, a top-tier retail asset, in an off-market, non-cash transaction. This acquisition is anticipated to be slightly accretive to its funds from operations (FFO) and adjusted FFO in 2019.

Also, the company is working toward improving productivity at its retail centers, by replacing lower volume tenants with higher productive retailers. It is also focusing on digitally native retailers, emerging brands, as well as co-working and entertainment concepts at its malls. Such efforts are likely to drive footfall at the company’s properties as well as provide a competitive edge.

Moreover, Taubman Centers has hiked its dividend payout 22 times since 1992, indicating its commitment toward maximizing of shareholders' wealth.

Nevertheless, the turbulent retail real estate market scenario is a cause of concern and will likely keep curbing its growth momentum in the near term.

Particularly, with customers shifting their preference to online shopping, mall traffic is getting affected, and store closures and retailer bankruptcies are becoming rampant. This has emerged as a pressing concern for retail REITs, including Taubman Centers, The Macerich Company (MAC - Free Report) , Urban Edge Properties (UE - Free Report) , Washington Prime Group , among others, as this is considerably bringing down demand for the retail real estate space and impacting occupancy rates. In fact, Taubman Centers’ management anticipates lease cancellation revenues for 2019 to be at levels above the company’s five-year average. This apart, the company’s international presence escalates risks of unfavorable foreign-currency movements.

Amid these, shares of Taubman Centers have lost 14.4% over the past three months against the 2% rise of the industry. Also, the Zacks Consensus Estimate for the current-year FFO per share has been revised marginally downward to $3.64 over the past week. Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.




Note: 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.

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