Month-to-month Dividend Inventory In Focus: Whitestone REIT

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 positive tax construction and pays out nearly all 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 under:

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 elements. Maintain 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 comparable to Texas and Arizona. Its tenant base may 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 sturdy tenants and service-oriented companies, together with grocery, restaurant, well being and health, monetary providers, logistics providers, schooling, and leisure, and so forth. 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% yr over yr to $11.3 million, whereas FFO per share rose 4.8% to $0.22. Identical-store internet working earnings (“SSNOI”) rose 6.6% to $24.1 million.

Additionally, rental fee development was 17.5%, down from 18.7% a yr in the past, supported by a leap in rental fee development in new leases of 33.3% vs. 32.2% a yr in the past. Renewal leases development was 13.9% versus 16.2% a yr in the past. There have been 30 new leases and 47 renewal leases within the quarter.

Yr so 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%.

Development Prospects

Whitestone’s development technique is centered round:

Investing in places with strong inhabitants development
Buying properties which can be 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 throughout the pandemic. In February 2021 and 2022, the REIT declared dividend will increase. Whereas it didn’t declare a dividend improve in 2023, it resumed growing the dividend in March 2024.

That stated, 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 improvement tasks will drive future development.

The continuation of SSNOI development since Q1 2021 is an effective signal. We wish to see it keep that manner. 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 growing its dividend, however it’s a good distance off from the pre-pandemic ranges. At present, 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 occasions. On the finish of the quarter, the REIT had $3.2 million in money and money equivalents. Furthermore, its payout ratio is far more sustainable than pre-pandemic ranges due to a decrease dividend.

The distribution appears safe going ahead. We anticipate Whitestone to keep up a dividend payout ratio of 49% for 2024, primarily based on our projected FFO-per-share of $1.01 for the complete yr. A dividend payout ratio under 50% is extremely uncommon for REITs, and certain implies a excessive degree of dividend security.

With such a low payout ratio, we consider the distribution will nearly definitely improve from its present low base over the subsequent a number of years. Whitestone at present has a 3.7% yield. Further 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 gives traders an anticipated complete annual return of 10.0% over the subsequent 5 years.

And that is with out any improve within the distribution over the subsequent 5 years. We consider distribution will increase are probably 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 sources under for extra month-to-month dividend inventory investing analysis.

And see the sources under for extra compelling funding concepts for dividend development shares and/or high-yield funding securities.