It’s been months since my last article Agree Realty (New York Stock Exchange:ADCs), one of my favorite net lease REITs.In that article, I explained why Agree was put on hold after the run-up to $80 by valuation. The company has since announced a dividend increase and third-quarter earnings, making the stock attractive to his nearly $70 mark.
Agree Realty is a net lease REIT with a solid balance sheet, an impressive real estate portfolio of primarily investment grade tenants and a track record of consistent dividend growth. They continue to raise funds to expand their real estate portfolio. This was seen in the third quarter as we continued to develop new properties for our new top tenant, Gerber Collision.
The valuation isn’t cheap at 18.4x price/FFO, but the stock looks more attractive today than it did a few months ago when it was trading at over 20x multiples at $80 per share. Agree usually trades at higher multiples than many net lease peers, especially in the last 5-6 years. Currently yielding just 4.2%, the company has all the hallmarks of a solid income investment with consistent dividend growth monthly. While the current price is attractive, a drop to the mid-$60s would be an attractive buying opportunity for long-term investors.
Earnings in the third quarter
The company continues to raise capital through a $300 million bond offering (4.8% due in 2032) in addition to ongoing equity issuance. As long as they get attractive debt and equity terms and put their earnings to good use, I think Agree will continue to raise capital at a solid pace. Another thing I found interesting about the company’s third-quarter earnings call was the addition of Gerber Collision to its top tenant list.
When I was flipping through the company’s website, I was interested in 25 development properties. Five of these will be completed by the end of the third quarter and the rest he expects to be completed by mid-2023. Of the 25 development projects, 19 are for Gerber collisions, all with 15 year leases. By the middle of next year he wants to know what percentage of the portfolio Gerber will be, but at the end of the third quarter he could be higher than 1.5% today.
At $80 (more than 20x), the stock isn’t as high as it was in August, but it’s certainly not cheap today either. When the stock price rises above $70, the price/FFO multiplier is 18.4. I’m not taking my position here, but I think the company’s long-term future is bright. Over the past few years, we’ve seen insider buying whenever the stock dipped below $65. This yields well over 4% and the Agree dividend increase makes it a very attractive income investment under $65.
As you can see, Agree has spent most of its time since mid-2016 at an average multiple of 17.6x over the past 10 years, demonstrating investors’ willingness to pay a modest premium to Agree compared to other netlease REITs. indicates that there is One reason, in addition to the investment grade tenant listing, is the strong and consistent dividend growth Agree has delivered over the past decade.
Further dividend increase
Agree switched to monthly payments in early 2021 and has increased its dividend several times a year since then. We expect this pattern to continue as the company has a solid balance sheet and a real estate portfolio filled with investment grade tenants.of Recent increase It was up 2.6%. With a current yield of 4.2%, add mid-single-digit dividend growth and Agree could be an attractive investment for investors looking for a solid combination of current yield and dividend growth.
We may not see explosive returns from $70, but with a yield of over 4% and consistent dividend growth, we think the risk/return is attractive to investors. The company continues to raise capital for investment and its developments, particularly at the new Gerber Collision property, should help the portfolio continue to grow. Realty Income (〇), Agree is a solid investment for conservative income investors.
At $70, the stock isn’t cheap today, but it’s certainly more attractive than it was just a few months ago. One thing I’ve noticed is that as soon as the stock hits him in the low $60s range, he seems to bounce back to $70. I’m not a short-term trader, but I believe that any break below $65 would be a great time to open or add to an existing position.