Kimco Realty KIM is well-positioned to gain from its predominantly grocery-anchored portfolio of shopping centers and diversified tenant base. A solid balance sheet position is likely to support its growth endeavors. Consistent dividend payouts solidify shareholder confidence. However, higher e-commerce adoption and high interest expenses are concerns.
Analysts seem bullish on this retail REIT, with the Zacks Consensus Estimate for its 2024 funds from operations (FFO) being moved marginally northward over the past two months to $1.63.
Shares of this REIT, carrying a Zacks Rank #3 (Hold), have risen 33.1%, outperforming the industry’s growth of 17.1% in the past six months.
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What’s Aiding KIM?
Kimco’s properties are strategically located in the drivable first-ring suburbs of its top major metropolitan Sunbelt and coastal markets, which offer several growth levers like high employment and strong spending power aiding in rent growth momentum. We project same-property net operating income (NOI) to increase 14.1% year over year in 2024.
In the third quarter of 2024, Kimco achieved 84% of its annual base rent (ABR) from the grocery-anchored portfolio. Given the necessity-driven nature of Kimco’s grocery-anchored portfolio, it is likely to continue witnessing healthy leasing activity in the upcoming period and remains well-positioned to tide over challenging times.
Kimco has a well-diversified tenant base led by a healthy mix of essential, necessity-based tenants and omni-channel retailers. Given the strength of its retailers and developed omnichannel presence, Kimco is likely to witness stable cash flows. For 2024, we estimate a year-over-year increase of 13.4% in the company’s net revenues from rental properties.
Kimco has been making efforts to bolster its financial strength. The company exited the third quarter of 2024 with $2.8 billion in liquidity. Kimco’s consolidated weighted average debt maturity profile is 8.3 years, and the company’s unencumbered properties represent more than 90%. The strong balance sheet allows the company to borrow at a favorable rate.
Solid dividend payouts remain the biggest attraction for REIT investors, and Kimco has remained committed to that. Concurrent with its third-quarter 2024 earnings release, Kimco announced a 4.2% increase in its dividend. In the last five years, this retail REIT has increased its dividend eight times. (Check Kimco’s Dividend History). These efforts to increase the dividend are encouraging and reaffirm investors’ confidence in the stock.
What’s Hurting KIM?
The market is witnessing a shift in retail shopping from brick-and-mortar stores to Internet sales, which has emerged as a concern for retail REITs, including Kimco.
Despite the Federal Reserve announcing rate cuts recently, the interest rate is still high and is a concern for Kimco. The company has a substantial debt of around $8.3 billion as of Sept. 30, 2024. Our estimate indicates a year-over-year increase of 21.5% in interest expenses in 2024.
Stocks to Consider
Some better-ranked stocks from the retail REIT sector are Regency Centers REG and Brixmor Property Group BRX, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Regency Centers’ current-year FFO per share has been raised marginally over the past month to $4.26.
The Zacks Consensus Estimate for Brixmor Property Group’s current-year FFO per share has been raised marginally over the past month to $2.14.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Kimco Realty Corporation (KIM) : Free Stock Analysis Report
Regency Centers Corporation (REG) : Free Stock Analysis Report
Brixmor Property Group Inc. (BRX) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
