Mack-Cali Realty (CLI)
Real estate investment trusts are dividend stocks that tend to have firehoses of levered free cash. That’s because once a month, every month, the rent checks and get paid and those payments pile up.
A number of REITs look like big-cash dividend stocks, but Mack-Cali Realty (CLI) stands out because of its superior dividend yield relative to its cash flow. CLI pays a dividend yielding 5.5% even as its valuation of price-to-levered free cash flow is in the single digits.
The brutal cold winter in the Northeast hurt Mack-Cali’s results, as expenses piled up for maintaining its portfolio of apartments. Shares in CLI are up just 1% so far this year to lag the broader market.
But that dividend probably couldn’t be safer thanks to the levered free cash CLI generates. During the past 12 months, CLI pumped out nearly a quarter of a billion dollars in free cash — after paying interest expense, capex and $135 million in dividends, according to S&P Capital IQ. With more than twice as much free cash as dividend payments, CLI is not only safe, but looks undervalued too.