Dividend Seeking in REITS
Stock: Wheeler Real Estate Investment Trust Inc (NASDAQ: WHLRD)
Wheeler, the $99.3 million Virginia-based REIT, currently has a very attractive 10.7% along with no trailing earnings brought by consecutive quarterly losses, a 2.3 times price-book ratio, and a 1.8 times price-sales ratio.
Interestingly, Wheeler has yet to turn a single financial year into a profitable one, but has cumulatively provided $40 million in dividend payouts in the past five years. Meanwhile, the REIT managed to reduce its overall debt by $5 million and raised $200 million in preferred share issuance(s).
In the recent first half that ended in June 30, Wheeler recorded an impressive 43.6% revenue increase year over year to $29 million and an operating margin of 12.8% compared to -5.8% a year prior. However, minus interest expenses of $8.75 million flipped the REIT back in to losses.
Jon S. Wheeler, Chairman and Chief Executive Officer“I am pleased that the Company is reporting earnings of $0.40 in line with guidance for the second quarter. We had some very positive movement in the second quarter, despite operating in a currently challenging retail environment. The sale of the two parcels demonstrates the strong demand for space in the secondary and tertiary markets, which we believe remain largely insulated from e-commerce retail trends. While the grocery store industry continues to evolve, we are confident that our retailers will adapt to consumer habits and that our real estate will remain the dominant location for retail in our markets.”
(10-K) Wheeler Real Estate Investment Trust, Inc. is a fully-integrated, self-managed commercial real estate investment company focused on acquiring and managing income-producing retail properties with a primary focus on grocery-anchored centers.
As of June, Wheeler had $7.05 million in cash and cash equivalents and $248 million in debt ($57 million lower year over year) with debt-equity ratio at 2.9 times compared with 3.5 times a year earlier. The REIT also had a decrease of $2.8 million in equity to $83.7 million
Analysts have an average overweight recommendation with a target price of $14.50 a share vs. $11.45 at the time of writing. Meanwhile, applying three-year PS average on revenue estimates this fiscal year along with a 20% margin indicated a per share figure of $11.25 a share
Wheeler’s historical performance could easily deter conservative investors. On the other hand, the REIT’s commitment to providing an ever increasing dividends to its common and preferred shareholders is just as impressive.
For the mean time, high-risk dividend-seeking should consider getting some of Wheeler’s preferred share instead, and take a pass on the REIT’s common stock.
*Wheeler REIT has two preferred shares, one of them is not redeemable and has no stated maturity.
Disclosure: I do not have shares of Wheeler REIT.