Kimco Realty Corp. (KIM), a real estate investment trust (:REIT), has recently declared a quarterly dividend of 19 cents per share or 76 cents on an annualized basis for the second quarter of 2012. The dividend is payable in cash on October 15, 2012, to shareholders of record on October 3.
A steady dividend payout facilitates the long-term strategy of Kimco to provide attractive risk-adjusted returns to its stockholders. Investors looking for high dividend yields are increasingly favoring REITs like Kimco, which presently has a decent yield of 3.8%. Solid dividend payouts are arguably the biggest enticement for REIT investors as U.S. law requires REITs to distribute 90% of their annual taxable income in the form of dividends to shareholders.
Kimco intends to pay its dividends from operating cash flows. The company maintains a conservative dividend payout ratio to maintain an optimum mix of investments to fuel its growth engine as well as strengthen its balance sheet by reducing debt and increasing its liquidity.
Over the years, Kimco has established a track record of conservative capital management and has historically maintained strong investment-grade debt ratings. Furthermore, the company has continuous access to capital through debt or equity financing, that provide the necessary resources to expand and develop its business.
With a geographically diverse portfolio concentrated mostly in high-income, high-growth areas, Kimco is the largest publicly traded owner and operator of neighborhood and community shopping centers in the U.S.
The company generally signs long-term leases with high credit tenants, which limits the downside risk and provides a steady source of income. Given the current uncertainty in the capital markets, Kimco has also modified its business strategy to focus on core retail competencies. The company intends to concentrate its future investments on the neighborhood and community shopping center segment, primarily focusing on the North American market.
We maintain our long-term Neutral recommendation on Kimco Realty. However, we have a long-term Outperform recommendation for Simon Property Group (SPG), one of the competitors of Kimco.
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