Key Reasons to Add Kimco Realty (KIM) to Your Portfolio Now
The increasing consumers’ preference for an in-person shopping experience in the wake of the pandemic has been steering the recovery in the retail real estate industry.
Given this backdrop, Kimco Realty’s KIM portfolio of premium properties in key metro markets of the United States, which are predominantly grocery-anchored, positions it well to ride the growth curve. Also, its focus on redeveloping mixed-use assets and robust balance sheet strength augur well.
Shares of this Zacks Rank #2 (Buy) company based in Jericho, NY, have gained 6.6% over the past month compared with the industry’s growth of 3.2%.
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Factors That Make Kimco a Solid Pick
Healthy Operating Platform: Kimco has well-located properties in the drivable first-ring suburbs of its top major metropolitan Sunbelt and coastal markets that offer several growth levers like high employment and strong spending power. Particularly, the top major metro markets contribute 86% of the annual base rent (ABR). With retail demand rebounding, Kimco is experiencing healthy leasing activity and occupancy gains across its portfolio.
In the first quarter of 2023, it signed 474 leases, aggregating 4.1 million square feet in its consolidated operating portfolio. Of this, 355 were renewals and options, and 119 were new leases. Moreover, as of Mar 31, 2023, the pro-rata anchor occupancy was 97.8%, up 50 basis points year over year.
With recovering industry fundamentals, KIM is likely to continue witnessing a healthy operating performance in the upcoming period.
Diverse Tenant Base: Kimco enjoys a highly diversified tenant base led by a healthy mix of essential, necessity-based tenants and omni-channel retailers. Popular names include TJX Companies, The Home Depot, Ross Stores, Albertsons Companies and Amazon/Whole Foods Market. This assures a stable stream of cash flows for the company.
Grocery-Anchored Centers: A major portion of Kimco’s portfolio comprises grocery-anchored centers that offer essential goods and services. In the first quarter of 2023, the company generated 81% of its ABR from grocery-anchored centers. Moreover, Kimco targets to achieve 85% of its ABR from this segment by 2025, which is encouraging.
Focus on Mixed-Use Assets: With mixed-use assets having gained popularity in recent years, Kimco’s focus to invest in and redevelop such assets clustered in strong economic metropolitan statistical areas that serve the last mile bode well. Such efforts enable the company to diversify the portfolio cash flow and offer a higher CAGR than retail-only sites. Per the first-quarter 2023 Investor Presentation, 13% of Kimco’s ABR comes from mixed-use centers. It aims to generate 15% of its ABR from such centers by 2025.
Balance Sheet Strength: Kimco focuses on maintaining a robust balance sheet position. It exited the first quarter with more than $2.3 billion of immediate liquidity. Also, it enjoys investment grade ratings of BBB+ from S&P and Baa1 from Moody’s, rendering the company access to the debt market at favorable rates. With strong financial footing and enough financial flexibility, KIM is well-positioned to capitalize on long-term growth opportunities.
Other Stocks to Consider
Some other top-ranked stocks in the retail REIT sector are Regency Centers REG, Federal Realty Investment Trust FRT and Kite Realty Group Trust KRG, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Regency Centers’ current-year’s funds from operations (FFO) per share has moved marginally upward over the past month to $4.12.
The consensus mark for Federal Realty’ ongoing year’s FFO per share has moved marginally upward over the past month to $6.50.
The consensus estimate for Kite Realty’s 2023 FFO per share has been raised marginally northward over the past month to $1.97.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Kimco Realty Corporation (KIM) : Free Stock Analysis Report
Federal Realty Investment Trust (FRT) : Free Stock Analysis Report
Regency Centers Corporation (REG) : Free Stock Analysis Report
Kite Realty Group Trust (KRG) : Free Stock Analysis Report
