Inland Real Estate Corporation (IRC) is a major owner and operator of single-tenant retail properties and shopping centers. It owns interests in about 149 properties, totaling approximately 15 million square feet of space. The Chicago metropolitan area and northwest Indiana make up about 60% of the retail square footage in the Inland portfolio, with additional square footage in the Minneapolis-St. Paul area, Minnesota, Wisconsin, Indiana, Ohio, Missouri, Nebraska, Kentucky, Tennessee and Florida.
Inland tenants range from national retailers, to small retail stores. In larger shopping centers, many are anchored with a major grocery store. Supervalu Inc. (SVU) occupies about 8.6% of the Inland portfolio, Roundy's Supermarkets, Inc (RNDY) occupies about 4.1%, and Dominick's Finer Foods, which is owned by Safeway Inc. (SWY) occupies about 3.6%. While major anchors like these are usually stable long-term tenants, it can also create risk when a major company runs into trouble. For example, there are concerns about Supervalu and Roundy's in terms of future direction and competition, so this is one area to keep an eye on.
Here are three reasons to consider buying Inland shares, especially on dips:
1) Inland recently reported solid financial results for the quarter that ended on June 30, 2012. It announced funds from operations per common share of 27 cents for the second quarter of 2012 compared to 6 cents for the second quarter of 2011.
2) In the past few weeks, one insider has been buying a significant number of shares right around current levels, which means there could be additional upside. On August 12, 2012, Daniel Goodwin, a director, bought 5,000 shares for $8.10, in a transaction valued at about $40,500. On August 7, he bought 7,700 shares for $8.05 each, in a transaction valued at about $61,985. On August 6, he bought 5,000 shares at $8.20 per share in a transaction valued at $41,000. On August 5, he bought about 29,000 shares at $7.99, in a transaction valued at about $230,000. These purchases represent nearly $400,000 worth of stock in just the month of August alone.
3) Inland is set up as a real estate investment trust, which means it must pay a very high percentage of annual earnings out to shareholders in the form of a dividend. While Inland does not yield as much as some mortgage real estate investment trusts like Annaly Capital Management, Inc. (NLY), (which yields about 13%), it is not as likely to raise capital, announce dividend cuts, or have mortgage prepayment risks that the mortgage REIT sector is known to experience. With that in mind, Inland could be poised to add some very strong yields and diversification to an income-focused portfolio.
Here are some key points for IRC:
- Current share price: $8.31
- The 52 week range is $6.57 to $9.65
- Earnings estimates for 2012: 86 cents per share
- Earnings estimates for 2013: 92 cents per share
- Annual dividend: 57 cents per share, which yields 7%
Data is sourced from Yahoo Finance.
Disclaimer: No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.