Retail REITs to Buy: Tanger Factory Outlet Centers (SKT)
Dividend Yield: 5.3%
If there is one area of the retail sector that is still thriving, it’s discounting. Consumers want their goods, and they want them cheap — and not all of them want to go online to get that.
That’s the sweet spot for Tanger Factory Outlet Centers (NYSE:SKT).
SKT is the biggest REIT focused on outlet shopping, and it has built a wide moat with producers, creating one heckuva brand name in the space. Today, Tanger owns a portfolio of 44 outlet shopping centers located in 22 states.
The beauty is that many of these outdoor shopping plazas are located in higher-income areas that are unaffected by recessions and other downturns. Meanwhile, SKT’s properties feature plenty of amenities, such as restaurants and movie theaters, to keep luring shoppers back for the bargains.
Earnings did dip a bit last quarter, but that was mostly due to expansion costs. In the end, that spending will translate into higher cash flows down the road — especially considering that Tanger’s portfolio is 98% occupied and the firm managed to grow its rents by 8.9% in the first quarter. Likewise, funds from operations (FFO) metrics are still very strong.
Shares are off roughly 40% since summer, so they’re priced to buy.