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Kimco Realty KIM is well-positioned to gain from its predominantly grocery-anchored portfolio of shopping centers and diversified tenant base. A solid balance sheet position is likely to support its growth endeavors. Consistent dividend payouts solidify shareholder confidence. However, higher e-commerce adoption and high interest expenses are concerns.
Analysts seem bullish on this retail REIT, with the Zacks Consensus Estimate for its 2024 funds from operations (FFO) being moved marginally northward over the past two months to $1.63.
Shares of this REIT, carrying a Zacks Rank #3 (Hold), have risen 33.1%, outperforming the industry’s growth of 17.1% in the past six months.
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What’s Aiding KIM?
Kimco’s properties are strategically located in the drivable first-ring suburbs of its top major metropolitan Sunbelt and coastal markets, which offer several growth levers like high employment and strong spending power aiding in rent growth momentum. We project same-property net operating income (NOI) to increase 14.1% year over year in 2024.
In the third quarter of 2024, Kimco achieved 84% of its annual base rent (ABR) from the grocery-anchored portfolio. Given the necessity-driven nature of Kimco’s grocery-anchored portfolio, it is likely to continue witnessing healthy leasing activity in the upcoming period and remains well-positioned to tide over challenging times.
Kimco has a well-diversified tenant base led by a healthy mix of essential, necessity-based tenants and omni-channel retailers. Given the strength of its retailers and developed omnichannel presence, Kimco is likely to witness stable cash flows. For 2024, we estimate a year-over-year increase of 13.4% in the company’s net revenues from rental properties.
Kimco has been making efforts to bolster its financial strength. The company exited the third quarter of 2024 with $2.8 billion in liquidity. Kimco’s consolidated weighted average debt maturity profile is 8.3 years, and the company’s unencumbered properties represent more than 90%. The strong balance sheet allows the company to borrow at a favorable rate.
Solid dividend payouts remain the biggest attraction for REIT investors, and Kimco has remained committed to that. Concurrent with its third-quarter 2024 earnings release, Kimco announced a 4.2% increase in its dividend. In the last five years, this retail REIT has increased its dividend eight times. (Check Kimco’s Dividend History). These efforts to increase the dividend are encouraging and reaffirm investors’ confidence in the stock.