There's More Inside This STORE Than You Think!
- It can be extremely dangerous placing a bet on a cheaply priced REIT, like Spirit Realty, when there is potential for a dividend cut.
- Surveying the list of Net Lease REITs, that demonstrate a “margin of safety” in both price and dividend safety, I find STORE Capital to be the most attractive.
- There’s more inside this STORE than you think!
On Monday, I wrote an article about Kimco Realty (KIM), a leading shopping center REIT that appears to be mis-priced, providing REIT investors with attractive risk-adjusted returns. While the company is exposed to significant retail headwinds, the management team is doing an excellent job of mitigating risks by focusing on internet-resistant tenants and improved balance sheet fundamentals. As I wrote:
KIM has spent years preparing for the changes, and the balance sheet is now in the best shape ever.
Let me be clear, I'm not recommending for investors to load up on retail REITs, instead, I am suggesting that investors take a more tactical approach, paying very close attention to the underlying revenue generators.
It can be extremely dangerous placing a bet on a cheaply priced REIT, like Spirit Realty (SRC), when there is potential for a dividend cut. In other words, the margin of safety applies to both price, and also the overall quality of the dividend. In the case of Spirit, it's obvious that the shares are "cheap for a reason."
Surveying the list of Net Lease REITs, that demonstrate a "margin of safety" in both price and dividend safety, I find STORE Capital (STOR) to be the most attractive. Taking a look at the most recent price performance, you can see that STOR has under-performed Realty Income (O) and National Retail Properties (NNN) month-to-date: