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Is Agree Realty's (ADC) Recent Dividend Hike Sustainable?

Zacks Equity Research

Agree Realty Corporation ADC has announced a 2.6% sequential hike in quarterly cash dividend. The company will now pay a dividend of 58.50 cents per share, up from the 57 cents paid in the prior quarter. The increased dividend will be paid on Jan 3, 2020, to shareholders of record as on Dec 20, 2019.

Based on the increased rate, the annual dividend comes to $2.34 a share, resulting in an annualized yield of about 3.2%, considering Agree Realty closing price of $72.69 on Dec 5.

Can Agree Realty Maintain its Payout?

Agree Realty’s ability to sustain the hiked dividends depends on funds from operations (FFO) growth and payout ratio. The company’s current payout ratio is 75.5%.

Additionally, the company’s performance depicts a robust FFO picture. Over the next five years, its FFO is projected to grow at a rate of 5.9%. For the ongoing year, favorable estimate revision reflects an upbeat outlook for the company. In fact, the Zacks Consensus Estimate for 2019 FFO per share has been marginally revised upward over the past week to $3.07, indicating year-over-year growth of 7.7%.

Moreover, it has a well-positioned balance sheet, with net debt to recurring EBITDA of 5.1x and fixed charge coverage ratio of 4.3x as of the September-end quarter.

These indicate that the company’s dividends are well covered and it will be able to sustain its current hiked dividend. 

Bottom Line

We believe such disbursements highlight the company’s operational strength and commitment toward rewarding shareholders handsomely. The hike reflects Agree Realty’s ability to generate solid cash-flow growth through its growing operating platform and high-quality retail portfolio.

Lastly, as investors prefer an income-generating stock, solid dividend payouts are arguably the biggest enticement for REIT investors. The recent dividend marks its 103rd consecutive payout and 5.4% year-over-year growth. Investors are always on the lookout for companies with a track record of consistent and incremental dividend payments to bet their money on.

Shares of this Zacks Rank #2 (Buy) company have rallied 9.8%, outperforming the industry’s growth of 3.2% over the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


Other Stocks to Consider

American Assets Trust, Inc.’s AAT shares have gained 2% in six months’ time. The stock currently carries a Zacks Rank of 2.

Brixmor Property Group Inc. BRX shares have rallied 22.1% over the past six months. At present, the stock carries a Zacks Rank of 2.

Retail Properties of America, Inc.’s RPAI shares have appreciated 14.9% over the past six months. Currently, the stock holds a Zacks Rank of 2.

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