Jun. 30 at 1:18 PM
$NNN REIT is currently trading around
$42/share with a 5.58% yield, and remains flat over the past year, despite rising FFO per share, AFFO per share, and revenue growth in Q1 2024.
Keep in mind, growing AFFO per share is the ultimate ‘value driver’ long term for REITs.
NNN REIT posted solid Q1 results with higher revenue and FFO, but tenant issues caused occupancy to dip to 97.7% from 99.4% last year.
Management is actively addressing the problem, having sold or re-leased many of the affected properties, and expects full resolution by year-end.
Meanwhile, the portfolio grew to 3,641 properties with
$232.4M in new investments.
These investments were made at an average cap rate of 7.4%, which is a measure of expected return based on the property’s income.
A 7.4% cap rate generally indicates the company expects to earn a 7.4% return annually on those new investments, before factoring in financing costs.
Despite macro headwinds, NNN maintains one of the strongest dividend profiles in the REIT sector.
Their AFFO payout ratio was just 66% in Q1, with an expected full-year payout ratio below 70%, more conservative than peers like Realty Income (O) and Agree Realty (ADC).
NNN has increased its dividend for 34 consecutive years, most recently by 2.7%.
A modest bump to
$0.595/quarter would mark another year of consistent growth, pushing the annual dividend to
$2.35/share.
Longer term, as tenant turnover is completed and the macro environment stabilizes, NNN could trade at a 14x–16x AFFO multiple, compared to its current 12.15x, implying a price target between
$48–
$51/share.
