Up to date on August thirtieth, 2024 by Bob Ciura
Whitestone REIT (WSR) has two interesting funding traits:
#1: It’s a REIT so it has a good tax construction and pays out the vast majority of its earnings as dividends.Associated: Record of publicly traded REITs
#2: It pays dividends month-to-month as an alternative of quarterly.Associated: Record of month-to-month dividend shares
You may obtain our full Excel spreadsheet of all month-to-month dividend shares (together with metrics that matter like dividend yield and payout ratio) by clicking on the hyperlink beneath:
Whitestone REIT’s trifecta of favorable tax standing as a REIT, a excessive yield, and a month-to-month dividend make it interesting to particular person traders.
However there’s extra to the corporate than simply these components. Preserve studying this text to study extra about Whitestone REIT.
Enterprise Overview
Whitestone is a retail REIT that owns about 57 properties with about 5.1 million sq. ft of gross leasable space primarily in fast-growing U.S. markets akin to Texas and Arizona. Its tenant base could be very diversified consisting of 1,453 tenants with no single tenant exceeding 2.1% of annualized base rental income.
Supply: Investor Presentation
Its technique is to prioritize renting to robust tenants and service-oriented companies, together with grocery, restaurant, well being and health, monetary companies, logistics companies, training, and leisure, and so on. in neighborhoods with excessive disposable earnings. Whitestone was based in 1998 and is headquartered in Houston, Texas.
Whitestone reported its second quarter 2024 outcomes on July thirty first, 2024, throughout which it witnessed an occupancy fee of 93.5% versus 93.3% in Q2 2023. For the quarter, income development was 3.0% to $37.6 million versus Q2 2023. Funds from operations (“FFO”) rose 6.5% 12 months over 12 months to $11.3 million, whereas FFO per share rose 4.8% to $0.22. Similar-store internet working earnings (“SSNOI”) rose 6.6% to $24.1 million.
Additionally, rental fee development was 17.5%, down from 18.7% a 12 months in the past, supported by a bounce in rental fee development in new leases of 33.3% vs. 32.2% a 12 months in the past. Renewal leases development was 13.9% versus 16.2% a 12 months in the past. There have been 30 new leases and 47 renewal leases within the quarter.
12 months thus far, income development was 3.5% to $74.8 million, FFO development was 1.7% to $23.1 million, and FFO per share was flat at $0.45. Whitestone’s newest 2024 steering is as follows: SSNOI development of three.0%-4.5% and core FFOPS of $0.90-$1.04. It forecasts an ending occupancy of about 94.3%.
Progress Prospects
Whitestone’s development technique is centered round:
Investing in places with strong inhabitants development
Buying properties which are mismanaged, overleveraged, or in foreclosures or receivership
Enhancing worth property
Since Whitestone started reporting FFO, it has seen minimal development in its FFOPS. This isn’t a results of decreased FFO however as an alternative a rise in shares excellent. Since 2014, Whitestone has issued greater than 25 million shares, successfully doubling its share depend, primarily to fund acquisitions.
Partly attributable to that share dilution, there was no dividend development from 2016 to 2019, and a dividend reduce occurred in the course of the pandemic. In February 2021 and 2022, the REIT declared dividend will increase. Whereas it didn’t declare a dividend enhance in 2023, it resumed rising the dividend in March 2024.
That mentioned, the REIT ought to have the capability to enhance its dividend in the long term. For now, we use an estimated dividend development fee of 6% via 2029, which might result in a sustainable payout ratio of ~51% for a REIT. Whitestone’s publicity to the excessive development Solar Belt market, in addition to its investments in acquisitions, re-development, and growth initiatives will drive future development.
The continuation of SSNOI development since Q1 2021 is an efficient signal. We wish to see it keep that method. For now, we estimate a FFOPS development fee of 5% via 2029.
Dividend & Valuation Evaluation
Whitestone reduce its dividend by 63% in 2020. The corporate is now steadily rising its dividend, however it’s a good distance off from the pre-pandemic ranges. Presently, the payout ratio of 49% is sustainable.
On the finish of Q2 2024, Whitestone had a debt-to-asset ratio of 63% and debt-to-equity ratio of 1.7 instances. On the finish of the quarter, the REIT had $3.2 million in money and money equivalents. Furthermore, its payout ratio is rather more sustainable than pre-pandemic ranges due to a decrease dividend.
The distribution appears to be like safe going ahead. We anticipate Whitestone to take care of a dividend payout ratio of 49% for 2024, based mostly on our projected FFO-per-share of $1.01 for the total 12 months. A dividend payout ratio beneath 50% is very uncommon for REITs, and certain implies a excessive degree of dividend security.
With such a low payout ratio, we imagine the distribution will nearly definitely enhance from its present low base over the following a number of years. Whitestone presently has a 3.7% yield. Extra distribution development would solely improve traders’ yield on price.
Closing Ideas
With a 3.7% distribution yield, constructive EPS development expectations, and month-to-month dividends, Whitestone provides traders an anticipated whole annual return of 10.0% over the following 5 years.
And that is with out any enhance within the distribution over the following 5 years. We imagine distribution will increase are doubtless within the medium time period as a result of the payout ratio of Whitestone is abnormally low for a REIT.
The month-to-month dividends are a bonus for traders in search of earnings.
Don’t miss the assets beneath for extra month-to-month dividend inventory investing analysis.
And see the assets beneath for extra compelling funding concepts for dividend development shares and/or high-yield funding securities.
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