Kimco Realty Corp. (KIM - Free Report) is making every effort to unlock the embedded value of its portfolio through development and re-development initiatives. Its tenant roster also includes several well-capitalized retailers that have fared relatively well.
The company is on track with its 2020 Vision that envisages the ownership of high-quality assets, concentrated in major metro markets that offer several growth levers. As part of such efforts, in 2019, it purchased three grocery-anchored land parcels and increased ownership interest in an existing property for an aggregate of $34 million.
In fact, Kimco Realty remains well-poised amid the transformation in the retail landscape, with a focus on service and experiential tenants, and omni-channel players. Moreover, the company is aiming to expand its small shop portfolio. The shops comprise service-based industries, such as restaurants, salons and spas; personal fitness; and medical practices. The shops enjoy frequent customer traffic and are not affected by the e-commerce boom. Amid limited new supply and favorable demographics, the diversification is likely to help Kimco Realty limit its operating and leasing risks.
Further, the company is working to boost its capital structure, and enhance its growth profile and tax efficiency. Recently, it closed a $2-billion unsecured revolving credit facility to boost financial flexibility.
Moreover, solid dividend payouts remain arguably the biggest attraction for REIT investors and Kimco Realty remains committed to that. In fact, the company’s dividend has grown, witnessing a compound annual growth rate (CAGR) of approximately 7%, since 2010. In addition, Kimco Realty recently announced an extension of its stock repurchase program for up to $300 million of shares of its common stock until Feb 28, 2022. Such shareholder-friendly moves boosted investors’ confidence in the stock.
Nonetheless, in connection to its strategic efforts, the company has been making significant dispositions of its assets in recent years. Particularly, dispositions for 2019 included 32 properties and five land parcels for $542.5 million and $50.8 million, respectively. For 2020, the company forecasts $200-$300 million in dispositions. While such efforts are encouraging for the long term, the dilutive effect on earnings from high disposition activity cannot be averted in the near term.
Furthermore, mall traffic continues to suffer amid a rapid shift in customers’ shopping preferences and patterns, with online purchases growing by leaps and bounds. In fact, with e-commerce gaining market share from brick-and-mortar stores, retailers are compelled to reconsider their footprint and eventually opt for store closures, while others, unable to cope with competition, have been filing bankruptcies. Such an environment has also led to tenants demanding substantial lease concessions, which mall landlords find unjustified. These have cast a pall on retail REITs, including Simon Property Group Inc. (SPG - Free Report) , Macerich Company (MAC - Free Report) , Taubman Centers (TCO - Free Report) , Kimco Realty and others.
Amid these, shares of Kimco Realty have dipped 28.3% so far in the year compared with the industry’s 16% decline. The Zacks Consensus Estimate for current-year funds from operations per share has been revised marginally downward over the past 60 days.
Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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