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Why Whitestone REIT And Its 8% Yield Is Overvalued

Feb. 10, 2019 4:45 PM ETWhitestone REIT (WSR)KIM28 Comments


  • FFO on a per share basis has been declining since 2015.
  • Payout ratio now sits at 98% with no dividend raises since inception.
  • Occupancy rate of 89% is low compared to peers.
  • Debt-to-EBITDA of 8.5x is absurd for a company with declining FFO per share.

Whitestone REIT (NYSE:WSR) is a $560 million market cap shopping center real estate investment trust that concentrates on properties in high-growth and income metropolitan areas. Their business model is essentially the same as Kimco Realty (KIM) for those seeking a more well-known peer comparison. The 8% monthly-paid dividend is attractive, but I see a number of issues with the underlying business that make me hesitant to jump on the bandwagon.

Image from finviz.com

With shares of Whitestone REIT at recent highs I thought that shares were worth a look to see if the price action was warranted or not. Like many stocks, WSR has recovered nicely from the end of year woes. The company will report Q4 earnings on February 27th and will hopefully give investors something to cheer about.

This next slide is front and center of their last investor presentation, and boy is it misleading:

Image from investor presentation 2/4/19

All those giant green upward arrows have to mean that things are going well, right? Revenue, NOI, FFO, dividends, they all seem to increased at a good clip over the years. The problem is that so has the share count.

Net asset value per share has taken a hit over the past year and FFO per share has been declining since 2015.

Image from investor presentation 2/4/19

If FFO per share has been in decline, then the dividend might have coverage issues. Indeed, the declining funds from operation per share has caused the payout ratio to climb to 98% for the most recently reported quarter despite the fact that the dividend per share has never been raised since the stock went public in 2010.

Image created by author

A payout ratio near 100% would make me skittish enough to consider not investing in a company, but for a company with

This article was written by

John Windelborn profile picture
Become a “Passive Landlord” with our 8% Yielding Real Estate Portfolio.

John Windelborn earned a Bachelor's in Molecular Biology from the University of Illinois and a Bachelor's of Nursing from Allen College in Iowa. He currently works full-time as a surgical nurse in the operating room. When he's not at work, he's pouring over earnings reports and reading everything about the investing world that he can get his hands on. While not formally trained in Finance, he has spent over 5 years trying to learn as much as possible about the market by actively trading both real and paper stocks and reading fellow contributor's articles on Seeking Alpha. He is ranked #3,090 out of 12,516 overall experts on TipRanks with a 67% rating success rate and an average return of 8.8%.

John now manages some family funds as well as his own, and serves as an unofficial financial adviser to his coworkers and their retirement plans. He has even been a guest speaker on WRKO radio out of Boston to discuss investment ideas.

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