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Published:
March 31, 2008
Weingarten Realty (NYSE: WRI, $34.32) is one of the nation's largest real estate investment
trusts (REITs). The company owns 335 commercial shopping centers
around the country, as well as 80 industrial properties -- a
portfolio comprising more than 72 million square feet of space
under management.
Fears
of a slowdown in consumer spending (and thus falling demand
for retail space) have taken a toll on the stock lately,
erasing more than one-fourth of Weingarten's market cap.
However, I think any near-term threats have been overstated.
Unlike some rivals, Weingarten has a diversified base of
5,700 tenants and doesn't depend too heavily on the business
of any single customer. Its largest customer accounts for
less than 3% of the firm's revenues, and the top ten
represent less than 15%.
And while the company does have a modest concentration of
properties in the central part of the country, recent
acquisitions along the east and west coasts should help provide
some geographic diversity and protect against a real estate
downturn in any one region.
Furthermore, many of the company's shopping centers are anchored
by Wal-Mart (NYSE: WMT) or other leading grocery chains, which
are better prepared to weather an economic slump than
discretionary retailers. In six decades of operation, occupancy
has never once dipped below the 90% mark -- and it currently
stands at a lofty +94.4%.
Nor do recent fourth-quarter results point to a slowdown.
In fact, Weingarten has signed more than 1,200 new leases or
renewals over the past year, at an average rental increase of
+14%. Meanwhile, funds from operations (FFO), a widely used cash
flow measure within the industry, rose +8% to reach $3.06 per
share.
As a REIT, Weingarten returns the lion's share of cash to
shareholders -- increasing its distributions for 23 consecutive
years. After a recent distribution hike to $0.525 per share, investors
can now expect to receive $2.10 per share over the next year for
a yield of 6.1%. And with dozens of new properties
under development and a steady stream of recurring rental income
from its existing portfolio, there is plenty more where that
came from.
Action
to Take --> Weingarten Realty is in the
fortunate position of collecting a steady stream of
income. And thanks to its tax-advantaged
structure, it is also able to pass along outsized
dividends to its owners.
Now that WRI is trading well off its highs,
investors can get much more bang for their buck. With
a stable outlook, reliable dividend track record and
attractive upside potential, I think this company would make a
sound pick for income-oriented value investors.
Nathan Slaughter
Editor
Half-Priced
Stocks
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About Nathan Slaughter
Nathan Slaughter has developed a long and successful track
record over the years by investing primarily in deeply discounted securities. He
uses advanced discounted cash flow techniques, along with a host of fundamental
research, to uncover quality stocks that are trading well below their actual
intrinsic value.
Nathan's previous experience includes a long tenure at
AXA/Equitable Advisors, where he provided comprehensive investment advisory
services to small businesses and high net-worth clients. He also honed his
research skills at Morgan Keegan, where he performed asset allocation,
retirement planning, and consultative portfolio management services.
Several years ago Nathan switched gears and decided to devote
his time exclusively to financial analysis and writing. He has since published
hundreds of articles for a variety of prominent online and print publications,
and he now writes exclusively for StreetAuthority.com.
Nathan's educational background includes NASD series 6, 7, 63,
& 65 certifications, as well as a degree in Finance/Investment Management.
He currently resides in Shreveport, LA with wife Julie and sons Aidan and Riley.
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