This year’s Black Friday was definitely a triumph for the retail sector. Numerous sources have confirmed the success including Retail Dive’s report, which stated:
” RetailNext, the leading in-store traffic analytics provider used by 450+ of the world’s most popular retail brands, announced initial insights from Black Friday Weekend 2023.
On Black Friday itself, retailers saw a pop in foot traffic of 2%, and health and beauty brands saw the most significant increase with a 13% jump, followed by jewelry brands, which experienced a nearly 7% jump. Retailers, on average, saw a 1.6% increase on Black Friday and the following Saturday.”
It’s undoubtedly a piece of positive economic news, isn’t it?
Who wouldn’t agree?
Moving on, let’s discuss additional figures from this festive season.
According to Mastercard, “Consumers are navigating the holiday season well and taking advantage of holiday promotions, giving them ample choice as they hunt for gifts for everyone on their list,” which resulted in an overall expenditure of $9.8 billion on Black Friday, marking a 7.5% year-over-year increase.
However, it’s essential to delve into the sustainability questions raised by this data.
Unveiling the Initial Insight Into Christmas Spending
It’s crucial to look beyond the surface before drawing any conclusions. This year’s holiday sales figures clearly underscore this point.
While Black Friday sales surged compared to 2022 and Cyber Monday also performed well, an essential paragraph from Retail Dive’s article highlights the challenges facing retailers amidst a backdrop of inflation, shopping fatigue, and increased consumer debt.
Moreover, various other sources hint at consumers’ cautious approach to discretionary spending, underlining their inclination towards smarter shopping to maximize value.
Fortune’s article, “‘That’s Not a Black Friday Deal’: Pinched Shoppers Hold Out for Deeper Discounts – Boding Ill for Earnings,” emphasizes how consumers are seeking deeper discounts, potentially signaling a subdued holiday shopping season and lackluster earnings for retailers.
It’s apparent that Christmas shoppers are seeking bargains, and retailers are responding to this demand.
The Financial Wisdom of Everyday Millionaires
In today’s economy, it’s prudent for consumers to seek bargains. Embracing this mentality is essential and not solely due to current economic conditions. “The Millionaire Next Door: The Surprising Secrets of America’s Wealthy” by Thomas J. Stanley and William D. Danko emphasizes the importance of spending money wisely.
The book’s principles hold true even today, advocating for discipline, hard work, and thriftiness to accumulate wealth over time. This mindset is crucial considering the current economic climate where consumers are watching their spending and seeking value.
As such, let’s delve into some real estate investment trusts (REITs) that have the potential to be lucrative long-term investments, offering the promise of a good night’s sleep.
While these investments may carry some risk, they also present an opportunity to acquire assets at a lower cost with the potential for future growth.
Shining a Spotlight on VICI Properties (VICI)
VICI, a gaming real estate investment trust (REIT), focuses on experiential real estate with a portfolio of leading gaming/casino, entertainment, and hospitality properties.
Annoyingly Spectacular Real Estate Expansion
VICI Properties has a real estate investment trust portfolio that boasts some of the most iconic properties in the gaming industry. From the Venetian Resort to the MGM Grand, these properties are practically irreplaceable. The recent sale-leaseback of 38 bowling alleys from Bowlero has expanded the VICI portfolio, adding experiential non-gaming properties to their already impressive lineup.
The core gaming portfolio includes 54 properties totaling approximately 4.2 million square feet of gaming space across multiple states, featuring more than 60,000 hotel rooms and approximately 500 retail outlets. VICI’s total portfolio covers approximately 125 million square feet, with 92 assets in total.
VICI’s high level of tenant concentration is mitigated by the iconic nature of many of its properties, making it difficult for tenants to relocate or shut down operations. Additionally, the long-term, triple-net lease structure further insulates VICI from tenant concentration risks.
VICI has demonstrated impressive growth, with an average adjusted funds from operations (“AFFO”) growth rate of 7.23% since 2019. The company’s positive AFFO per share growth is a testament to its strong performance.
NETSTREIT specializes in single-tenant, net-lease retail properties and boasts a portfolio of 547 properties spanning across 45 states, with an occupancy rate of 100%. Their focus on engaging in sale-leaseback transactions with high-credit quality tenants has solidified their position in the market.
While NTST has a concentration in their top 3 tenants, their strong balance sheet, with a net debt plus preferred equity to adjusted EBITDAre of 4.2x, demonstrates their stability in the industry. Their average AFFO growth rate of 13.16% since 2021 further emphasizes their noteworthy performance.
Americold Realty Trust (COLD)
Americold Realty focuses on temperature-controlled warehouses, playing a crucial role in the food supply chain. Their properties are considered “mission-critical” in ensuring the quality and safety of food products, demonstrating their essentiality in the industry.
REIT Industry Continues to Boom with Americold, American Tower, and STAG Industrial Leading the Pack
Warehouse storage and temperature-controlled logistics have reached new heights with Americold, the standout being its global reach. Covering approximately 1.5 billion refrigerated cubic feet sprawled across the globe from North and South America, Europe, and Asia-Pacific, Americold’s colossal presence is unmatched. This reiterates its dominance in the market, possessing 243 temperature-controlled properties.
Americold’s Dominance Unparalleled
The North American region takes the lion’s share of the cold storage colossus, with 195 facilities monopolizing 1.3 billion cubic feet, or 39.5 million square feet. Europe follows next in line with 27 temperature-controlled facilities covering about 121 million cubic feet, solidifying its global footprint that no competitor has come close to matching.
At the end of the third quarter, the inspirational story of Americold’s growth continued, with a staggering 83.0% economic occupancy of their warehouse segment, a 293 basis point increase compared to the third quarter of 2022. This significant surge represents the impact Americold’s steadfast nature has had against all odds.
The enduring relationship with its top 25 tenants adds another feather to Americold’s cap, with an average tenure of about 36 years. This remarkable feat is a testament to the company’s unwavering consistency and trustworthiness, with 15 out of its top 25 tenants being investment grade.
Analysts Bullish on Americold’s Growth Trajectory
For the next few years, analysts predict accelerated growth for Americold, with AFFO per share expected to skyrocket by 14% in 2023, followed by 13% and 15% in 2024 and 2025 respectively. This unrelenting rise in numbers only cements Americold’s position as a formidable force to be reckoned with in the REIT sector.
While change may be constant, Americold’s unwavering dedication is reflected in their dividend growth rate of 5.93%. The company’s continued strategic positioning and risk-management capabilities explain the conservative dividend policy. With a dividend yield of 3.13% and solid AFFO payout ratio of 79.28%, Americold’s prudent financial approach is clear.
The Future Looks Bright for Americold as We Rate It a Buy
Shifting gears, American Tower’s towering presence in the REIT sphere is equally awe-inspiring. With an extensive portfolio of approximately 225,000 communication assets spread across 25 countries on 6 continents, American Tower’s global influence is unmatched. Their strategic focus on developing, operating, and leasing multitenant communications real estate to top wireless providers and broadcasters is nothing less than a symphony in the REIT world.
American Tower’s Monumental Growth Trajectory
American Tower has emerged as a true growth machine over the last decade, delivering an average AFFO growth rate of almost 11% and an average dividend growth rate of an astounding 20.70%. Analysts project a 6% increase in AFFO per share in 2024 and an 8% surge in 2025, further solidifying American Tower’s steady ascent to dominance.
The company’s dividend yield of 3.11% is backed by a well-covered AFFO payout ratio of 60.04%, showcasing American Tower’s robust financial position and commitment to providing shareholders with consistent dividends.
American Tower – A Reinforcement of the Buy Rating
Last but certainly not least, STAG Industrial’s strategic positioning in the industrial REIT sector is a testimony to its unparalleled tactics. With a focus on acquiring, owning, and operating single-tenant industrial properties across smaller, more fragmented markets, STAG has carved its own niche in the market, targeting areas where they have a strategic advantage against local investors.
STAG Industrial – Pioneering its Way Through
STAG’s portfolio comprising 568 properties across 41 states, covering approximately 112 million square feet, reflects their steadfast dedication to strategic expansion. This strategic focus has enabled STAG to maintain a total portfolio occupancy of 97.6% and operating portfolio occupancy of 98.0%, a testament to their unyielding commitment to excellence.
The industrial REIT’s tactical approach is a breath of fresh air in the industry, with their distinctive focus on middle-market industrial properties setting them apart from their peers. This strategic divergence has established STAG as a force to be reckoned with in the REIT landscape, showcasing their unparalleled understanding of market dynamics and the ability to capitalize on unique opportunities.
Onwards and Upwards for STAG as We Rate It a Buy
STAG Industrial: A Mixed Bag of Financial News
In a recent report, STAG revealed its financial performance for the third quarter of the year. Total revenues for the quarter stood at $179.3 million, marking a significant rise from the previous year’s $166.3 million.
The company also reported a 5.3% increase in Same-Store cash net operating income (“NOI”), which surged from $119.5 million in the third quarter of 2022 to $125.9 million in the same period of 2023.
Furthermore, the Core FFO came in at $108.8 million, or $0.59 per share, compared to $103.3 million in Core FFO, or $0.57 per share, for the corresponding period in 2022. This represents a per share increase of 3.5% in Core FFO year-over-year.
STAG’s balance sheet boasts an investment-grade rating with a Baa3 credit score from Moody’s, underpinned by robust debt metrics including a net debt to run rate adjusted EBITDAre of 4.9x, a long-term debt to capital ratio of 43.28%, and a fixed charge coverage ratio of 5.7x.
The company’s debt structure presents 87.3% fixed rate with a weighted average interest rate of 3.72% and a weighted average term to maturity of 4.5 years. Additionally, STAG indicated minimal debt maturities in 2023 and 2024 as well as total liquidity of $630.2 million as of October 31, 2023.
Over the past decade, STAG has recorded an average AFFO growth rate of 4.94% and an average dividend growth rate of 3.22%. Analysts anticipate an AFFO per share increase of 6% in 2023, followed by 3% and 6% in 2024 and 2025, respectively.
With a current dividend yield of 4.10%, the stock offers an attractive yield for an industrial REIT, supported by a well-covered AFFO payout ratio of 78.08%. Notably, its P/AFFO multiple is currently at 18.12x, higher than the 10-year average AFFO multiple of 16.41x.
An Inconclusive Rating
Beyond stock selection, ensuring a good night’s sleep involves various other practices such as maintaining healthy lifestyle habits, spending time with loved ones, and adhering to a budget. However, there are still restless nights, particularly when investments in less stable stocks such as Medical Properties Trust (MPW) and Brandywine Realty (BDN) are in play.
Over time, rigorous evaluation of high-quality stocks has proven effective in averting significant losses and fostering better sleep. While the list of stocks mentioned may not be considered blue chips, they are still deemed worthwhile investments.
As mentioned, STAG is currently rated as a Hold due to valuation considerations. However, NTST, VICI, AMT, and COLD are all positioned as buys. COLD, in particular, stands out due to its promising growth prospects.
This is why COLD emerges as the top choice, with projected annual returns estimated between 25% and 30%.
As always, thank you for reading and sharing your thoughts.
Wishing You Successful Investing!
Note: Brad Thomas, a Wall Street writer, may not always be right in his predictions or recommendations given the unpredictable nature of the market. This article serves as a tool for research and aims to encourage critical thinking.