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American Finance Trust Inc: Exceptional Portfolio & Safe, Strong, 10.2% Dividend

Published Mon, 22 Feb 2021 12:24:27 on Income Investors

American Finance Trust Stock Could Double Again in 2021
American Finance Trust Inc (Nasdaq: AFIN) may not be the most followed real estate investment trust (REIT), but for investors who like undervalued stocks that provide high-yield dividends, AFIN stock might be right up their alley.
American Finance Trust is focused on acquiring and managing a diverse portfolio of service-oriented and traditional retail- and distribution-related commercial real estate properties in the U.S. The company’s $3.9-billion real estate portfolio consists of 885 properties, covering 19 million square feet, or roughly 330 NFL fields.
The REIT’s top 10 tenants include Sanofi SA (Nasdaq: SNY), The Stop & Shop Supermarket LLC, Bob Evans Restaurants, LLC, Home Depot Inc (NYSE: HD), Dollar General Corp. (NYSE: DG), and Lowe’s Companies Inc (NYSE: LOW). (Source: “Top 10 Tenants,” American Finance Trust Inc, last accessed February 19, 2021.)
Other tenants include FedEx Corporation (NYSE: FDX), Tractor Supply Company (Nasdaq: TSCO), Hardee’s Restaurants LLC, and Circle K Stores.
The occupancy rate for American Finance Trust’s properties stands at 94.2%.
In January, American Finance Trust announced that it had acquired 35 properties for $61.3 million during the fourth quarter. In full-year 2020, American Finance acquired 107 properties for $218.3 million. (Source: “American Finance Trust Announces 95% Rent Collected in Fourth Quarter; Over $60 Million of Fourth Quarter Acquisitions,” American Finance Trust Inc, January 7, 2021.)
“We are also pleased to resume our acquisition program, closing on over $60 million of necessity and service-oriented retail assets in the fourth quarter, bringing our total 2020 acquisitions to $218 million,” said Michael Weil, CEO. “The portfolio has been intentionally constructed and has performed brilliantly throughout a very challenging year.”
Rent Collection Figures Improve
In the second quarter of 2020, during the heart of the COVID-19 pandemic-related lockdown, American Finance Trust Inc ran into a little short-term trouble, collecting just 84% of its rent. Many thought this would impede the company’s ability to pay a regular dividend.
That might explain why AFIN stock hasn’t rebounded as well as other REITs. American Finance Trust stock is up 100% since bottoming in March 2020, but it’s still down 37% year-over-year.


The company’s rent collection problem was just a short-lived blip, though. By the third quarter, 91% of the original cash rent due in the third quarter was received, including 96% of the cash rent due by the REIT’s single-tenant portfolio. (Source: “American Finance Trust Provides Rent Collection Update,” American Finance Trust Inc, October 8, 2020.)
That said, American Finance Trust was in a better financial position than even those numbers suggested. Five percent of the unpaid rent was part of a pre-approved agreement, and another two percent was being negotiated.
Things got even better in the fourth quarter, with the company announcing that it had collected 95% of its rent, including 98% from its single-tenant portfolio.
“As anticipated, we collected substantially all of the original cash rent due across the portfolio and marked another quarter of strong results,” said Weil. “Our single-tenant portfolio remained excellent with 98% of rent collected while our multi-tenant portfolio improved to 87% during the quarter.” (Source: American Finance Trust Inc, January 7, 2021, op. cit.)
Solid Third-Quarter Financial Results
Last November, American Finance Trust announced that its third-quarter revenue climbed 7.7% year-over-year to $78.5 million. (Source: “American Finance Trust Announces Third Quarter 2020 Results,” American Finance Trust Inc, November 4, 2020.)
The company reported a third-quarter net loss of $7.1 million ($0.07 per share), compared to a third-quarter 2019 net loss of $2.9 million ($0.03 per share). The 2020 third-quarter net loss improved significantly compared to the second-quarter net loss, which came in at $21.8 million.
In the third quarter, American Finance Trust Inc’s cash net operating income was $54.9 million, versus $55.2 million in the same prior-year period.
“Our third quarter results highlight the resilience of our best-in-class, necessity-based retail portfolio that is net leased to mostly investment-grade and implied investment grade tenants, has remained remarkably stable throughout the pandemic,” said Weil. (Source: Ibid.)
“We have also further de-risked our balance sheet, completing several transactions that increased our weighted average debt term to 5.0 years from 3.9 years and lowered our weighted-average interest rate to 3.8% from 4.5% a year ago. We now have no significant near-term debt maturing, and 76% of our debt matures in 2025 or later, giving us significant balance sheet flexibility to support our future growth.”
The company’s funds from operations (FFO) were $25.6 million ($0.24 per diluted share), compared to $25.0 million ($0.24 per diluted share) in the third quarter of 2019.
In the third quarter of 2020, the REIT’s adjusted funds from operations (AFFO) increased 8.9% year-over-year and 20.3% sequentially to $25.5 million ($0.23 per share). The annualized AFFO came in around $0.92, which means the company had more than enough liquidity to cover its annual dividend of $0.85 per unit.
American Finance Trust Inc will be reporting its fourth-quarter and full-year 2020 results on February 24 after the Nasdaq closes.
AFIN Stock Dividend Changes From Monthly to Quarterly
American Financial Trust stock’s annual dividend yield is 10.2% and its trailing annual yield is 11.6%.
The REIT used to pay out its dividend monthly, but it recently changed the frequency to quarterly. That apparently led some to mistakenly believe the company had suspended its dividend.
In January, American Finance Trust declared a quarterly dividend of $0.2125 per share, at an annualized rate of $0.85. Previously, the REIT was paying a monthly dividend of $0.070833, which worked out to $0.212499 per quarter. (Source: “American Finance Trust Announces Common Stock Dividend for First Quarter 2021,” American Finance Trust Inc., January 1, 2021.)
The Lowdown on American Finance Trust Inc
AFIN stock is great for investors who are looking for an undervalued stock with a reliable, high dividend yield.
Thanks to a strong acquisition strategy, solid balance sheet, and improving economic conditions, chances are good that American Finance Trust Inc will raise its quarterly dividend payout at some point in 2021.
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Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
SANOFI-AVENTIS 43.80   26.6 1.65 1.16 2.65
HOME DEPOT 233.80   23.3 10.04 5.44 2.33
LOWES COMPANIES 113.88   35.6 3.20 2.20 1.91
FEDEX 173.51   93.8 1.85 2.60 1.51
TRACTOR SUPPLY 99.34   22.1 4.49 1.40 1.32
DOLLAR GENERAL 157.10   25.2 6.23 1.28 0.81