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A Safe 6.1% Yield with One of the Nation's Largest REITs
By: Nathan Slaughter
Editor, Half-Priced Stocks
Learn more about Half-Priced Stocks (click here)

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

About Half-Priced Stocks

The mission of Half-Priced Stocks is to help readers identify securities that are trading at steep discounts to their intrinsic net worth.  In some cases this discount can reach up to 50% or more, giving savvy value investors the chance to purchase quality stocks for just pennies on the dollar. (Learn More)

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. 

To learn more about Nathan Slaughter's premium value investing newsletter -- Half-Priced Stocks -- please visit this link.



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