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Kimco Realty: Bullish on Improved Occupancy, Dividend Hike

Kimco Realty Corp. (KIM) is a real estate investment trust company that engages in the ownership and operation of open-air shopping centers. It also specializes in shopping center acquisitions, development, and management. The company was founded in 1973 and is headquartered in New Hyde Park, NY.

Shares of Kimco Realty have one-year gains of nearly 31% and losses year-to-date of approximately 4%. I am bullish on KIM stock as its valuation and dividend yield are both attractive, and funds from operations for the full year 2021 have increased. Investors looking for dividend stocks should take a closer look at Kimco Realty. REITs are defensive assets that can protect investors as the U.S. stock market has started 2022 on a weak note.

Kimco Realty Business News

On February 2, 2022, Kimco Realty announced a quarterly cash dividend of $0.19 per common share, an 11.8% increase from the prior quarterly dividend. It is payable on March 24, 2022, to shareholders of record on March 10, 2022.

The company also declared a quarterly dividend for shares of Kimco’s 5.125% Class L and 5.25% Class M cumulative redeemable preferred stock. Dividends on the shares of preferred stock will be paid on April 15, 2022, to shareholders of record on April 1, 2022.

Fourth Quarter and Full-Year 2021 Results

The firm has announced its Q4 2021 and full-year financial results, which were mixed related to EPS and funds from operations (FFO).

KIM stock earnings have rebounded from their decline, especially in Q2 and Q3 of 2020, due to the pandemic.

In Q4 2021, notable highlights include Nareit FFO of $240.1 million, or $0.39 per diluted share, compared to $133.0 million, or $0.31 per diluted share, for the same period last year, pro-rata portfolio occupancy growth of 30 basis points sequentially to 94.4%, and sequential growth of pro-rata anchor occupancy of 20 basis points to 97.1% and small shop occupancy growth of 40 basis points to 87.7%. There was also a 12.9% increase in same-property net operating income (NOI).

“We are extremely proud to have completed another quarter with leasing volume exceeding two million square feet, bringing leasing for the year to 8.7 million square feet,” stated Kimco Realty CEO Conor Flynn.

Turning to full-year 2021 financial results, net income available to the company’s common shareholders was $818.6 million, or $1.60 per diluted share, for the full year 2021 compared to $975.4 million, or $2.25 per diluted share, for the full year 2020.

Nareit FFO was $706.8 million, or $1.38 per diluted share, for the full year 2021. For the full year 2020, Nareit FFO was $503.7 million, or $1.17 per diluted share.

The 2022 full-year outlook estimates net income available to common shareholders (per diluted share) in the range of $0.51 to $0.55 and Nareit FFO (per diluted share) in the range of $1.46 to $1.50.

Fundamentals

Kimco Realty has a moderate balance sheet with a debt/equity ratio of 0.77 as per the latest quarter. Warning signs include the fact that Kimco Realty Corp keeps issuing new debt. Long-term debt has grown from under $4.9 billion at the end of 2018 to under $7.5 billion by the end of 2021.

Revenue per share has been in decline for the last five years, and debt is not well covered by operating cash flow. Also, it is notable that shareholders have been diluted in the past 12 months, with total shares outstanding growing by 42.5%.

However, profitability strength remains strong. The dividend increase announced is also a very positive factor.

Valuation

KIM stock is attractive based on its P/E ratio of 14.5x compared to the U.S. REITs industry average of over 40x and based on its P/B ratio of 1.5x compared to the U.S. REITs industry average of ~2x.

Wall Street’s Take

Kimco Realty has a Strong Buy consensus based on 10 Buys and two Hold ratings. The average Kimco Realty price target of $26.83 represents 15.3% upside potential.

Conclusion

Occupancy and rent growth have improved along with Nareit funds from operations for the full year 2021. The dividend increase is positive, and the valuation is attractive. Investors looking for income generation from dividends may find KIM stock interesting as a total return will be enhanced by both potential price appreciation and dividend yield.

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