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Why Whitestone REIT And Its 8% Yield Is Overvalued

Published Sun, 10 Feb 2019 16:45:09 -0500 on Seeking Alpha

Whitestone REIT (WSR) is a $560 million market cap shopping center real estate investment trust that concentrates on properties in high-growth and income metropolitan areas. Their business model is essentially the same as Kimco Realty (KIM) for those seeking a more well-known peer comparison. The 8% monthly-paid dividend is attractive, but I see a number of issues with the underlying business that make me hesitant to jump on the bandwagon.

Image from finviz.com
With shares of Whitestone REIT at recent highs I thought that shares were worth a look to see if the price action was warranted or not. Like many stocks, WSR has recovered nicely from the end of year woes. The company will report Q4 earnings on February 27th and will hopefully give investors something to cheer about.
This next slide is front and center of their last investor presentation, and boy is it misleading:

Image from investor presentation 2/4/19
All those giant green upward arrows have to mean that things are going well, right? Revenue, NOI, FFO, dividends, they all seem to increased at a good clip over the years. The problem is that so has the share count.
Net asset value per share has taken a hit over the past year and FFO per share has been declining since 2015.

Image from investor presentation 2/4/19
If FFO per share has been in decline, then the dividend might have coverage issues. Indeed, the declining funds from operation per share has caused the payout ratio... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
KIMCO REALTY 18.30   19.1 0.96 1.12 6.09

KIMCO REALTY - KIM
KIMCO REALTY - KIM  


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