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Agree Realty (ADC) Hikes Dividend, Collects 99% of Rent Payments

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Zacks Equity Research
·3 min read
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Agree Realty Corporation ADC has announced a 3.3% hike in the company's quarterly dividend rate to 62 cents from 60 cents paid earlier. The new dividend is scheduled to be paid on Jan 6, to shareholders of record as of Dec 23, 2020.

Moreover, the company noted that it has received November rent payments from 99% of its portfolio. This encouragingly marks the third straight month the company has obtained 99% of all contractual monthly rental obligations. Also, Agree Realty has entered into deferral agreements with tenants representing less than 1% of November rents.

Notably, solid dividend payouts remain the biggest enticement for REIT investors and Agree Realty remains committed to boosting shareholder wealth. The cash dividend, which reflects a year-over-year increase of 6%, is the 107th consecutive dividend distribution of the company. Based on the increased rate, the annual dividend comes to $2.48 per share and leads to an annualized yield of 3.74%, considering the retail real estate investment trust’s (REIT) closing price of $66.28 on Dec 1.

Agree Realty’s leverage picture looks impressive. Its debt/equity ratio of 0.51 compares favorably with 0.97 for its industry. Additionally, this retail REIT churns cash flow per share of $3.63 compared with the industry average of $2.19. It witnessed robust cash flow growth in the past. Furthermore, the company’s current cash flow growth is significantly higher than the industry average. Its healthy rent collections in the recent months also look encouraging. Secure cash flow will help Agree Realty sustain its dividend payouts in the future.

Notably, businesses of physical stores widely depend on customer traffic. However, consumers are avoiding public spaces and have been increasingly opting for online purchases amid the pandemic. This, in turn, has been taking a huge toll on tenants’ liquidity, thereby making it difficult to meet their rental obligations. As a result, retail REITs, which have already been battling against store closures and bankruptcy issues, have been feeling the heat. In fact, apart from Agree Realty, this trend has affected other retail REITs, including Macerich MAC, Simon Property SPG and Kimco KIM, among others.

Nevertheless, having exposure to essential retail tenants have been the saving grace for retail REITs during these challenging times. Agree Realty is not different and as such, its rent collections have been decent. Particularly, this retail REIT is into acquisition and development of properties net leased to industry-leading retail tenants in e-commerce and recession-resistant sectors. Furthermore, the company has raised the current-year acquisition guidance to $1.25-$1.35 billion backed by its decent investment volume and robust pipeline.

Agree Realty currently carries a Zacks Rank #3 (Hold). The company’s shares have depreciated 5.5%, narrower that its industry’s decline of 15.5% so far in the year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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