by Marc Bastow | August 28, 2012 10:40 am
When it rains at the beach, there’s nothing to do but head off to the outlet stores. I hate that — especially since everyone else does the same — and because it’s only a few days before the start of school, my guess is all of the “Delmarva” (Delaware, Maryland and Virginia) residents squeezed into beach communities are thinking the same thing.
So we shoehorn into the parking lot and start the long walk from store to store. Nike (NYSE:NKE). Ralph Lauren (NYSE:RL), Coach (NYSE:COH) and Gap (NYSE:GPS) scream out with bargains, and shoppers flock to them for last-minute school wear.
A less familiar name is Tanger Factory Outlet Stores (NYSE:SKT), even though it’s the heart of the operation.
The real estate investment trust (REIT) develops, owns and operates the outlets. Given the line of cars backing up Route 1 traffic in Rehoboth Beach, you might think Tanger is doing pretty well — and you would be correct!
Tanger runs a lot of outlet malls. As of the end of last year, SKT owned and operated 36 outlet centers totalling more than 10.7 million square feet of leasable space — that’s more than 2,300 stores and approximately 400 store brands.
REITs are entities that receive corporate tax benefits, and in exchange must dole out 90% of their income each year to shareholders in the form of dividends. But while dividends are the goal here, investors obviously won’t cough if they get some capital gains, too.
The good news for Tanger: Not only has the company increased its dividend each year since going public in 1993 (and today it yields a solid 2.53%) but the share price also has appreciated generously: 13% year-to-date, 24% in the past 52 weeks, and 76% in the past 10 years!
In fact, despite the difficulties in the entire real estate segment, REITs are holding up pretty well, as pointed out by Brad Thomas at Seeking Alpha. Mall and outlet REIT Simon Property Group (NYSE:SPG) has seen similar gains to Tanger, and smaller retail REIT Urstadt Biddle Properties (NYSE:UBA) has seen more modest gains this year, but has kept up dividend increases for nearly two decades and offers a heftier 5% yield.
Another interesting tidbit about Tanger is that it has not been impacted by online shopping nearly as much as brick-and-mortar retailers like Target (NYSE:TGT) and Wal-Mart (NYSE:WMT), CEO Steven Tanger recently told CNBC.
Revenues are up almost 17% since 2009, and while 2011 cash flow was impacted by a year of huge capital expenditures, the numbers add up to a company with room to grow.
More importantly for investors, Tanger continues to manage itself to profitability, and since that profitability is forced to feed the dividend beast, it’s all good.
Hmm. Maybe it wasn’t such a bad day at the beach after all.
Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing, he did not hold a position in any of the aforementioned securities.
Source URL: http://investorplace.com/2012/08/tanger-reit-worth-the-shopping-trip-skt-spg-uba/
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