NYC Landlord, Alexander’s, Inc., Has Reliable Dividend
For those who want to invest in real estate but don’t want the hassle, there are opportunities like Alexander’s stock.
Most real estate investment trusts (REITs) have taken a beating in the high-interest-rate environment. That’s because higher interest rates make it more expensive to borrow and cut into profit margins. With interest rates poised to begin falling, investors are starting to take a second look at REITs. One REIT that has been performing exceptionally well of late is Alexander’s, Inc. (NYSE:ALX).
When most people think of New York City real estate, they probably think of Donald Trump. And, fair enough, he has touted himself as the scion of New York real estate. But one of the larger landlords that should be taken into consideration is Alexander’s.
The company leases, manages, develops, and redevelops properties in the greater New York City metropolitan area. Alexander’s activities are conducted through its manager, Vornado Realty Trust (NYSE:VNO). And, interestingly, Trump also has ties with Vornado through his 30% stake in the jointly owned building at 1290 Avenue of the Americas. (Source: “What Real Estate Does Trump Own in NYC Anyway?,” Curbed, March 25, 2024.)
But I digress. Alexander’s Inc’s current real estate holdings consist of five properties in the greater New York City area.
The company’s real estate empire can fluctuate in size. In May 2023, Alexander’s completed the sale of its Rego Park III land parcel in Queen’s New York for $71.0 million. (Source: “Alexander’s Completes Sale of Rego Park III,” Alexander’s, Inc., May 19, 2023.)
Back in May 2021 Alexander’s sold its Paramus property in New Jersey to IKEA Property, Inc. for $75.0 million. (Source: “Alexander’s Announces IKEA Exercises its Option to Purchase Paramus Property,” Alexander’s, Inc., May 13, 2021.)
Strong First-Quarter Earnings Growth
Alexander’s is light on news and even on words of wisdom and insight from management in its financial results, but it makes up for this with strong results. For the first quarter ended March 31, 2024, Alexander’s announced that its rental revenue had increased 16% year over year to $61.39 million. (Source: “Form 10-Q,” U.S. Securities and Exchange Commission, May 6, 2024.)
Net income climbed 43% to $16.1 million, or $3.14 per share, while funds from operations (FFO) advanced 37% to $25.5 million, or $4.98 per diluted share.
Maintains Quarterly Distribution of $4.50 Per Share
Thanks to its reliable cash generation, Alexander’s Inc is able to pay a reliable, high-yield dividend. Even during the 2020 health crisis, the worst economic period in almost a century, the REIT was able to maintain its dividend.
In May, the company’s board declared a regular dividend of $4.50 per share, or $18.00 on an annual basis, for an inflation-thumping yield of 7.6%.
Alexander’s stock has a history of raising its payout, having done so every year from 2014 to 2018, but it has held it at $4.50 per quarter since 2018.
To maintain its REIT status, which includes distributing at least 90% of its taxable earnings, sometimes Alexander’s has to pay out a special dividend.
In 2012, the REIT sold its Kings Plaza Mall in Brooklyn to Macerich Co (NYSE:MAC) for $751.0 million, or net proceeds of $479.0 million. (Source: “Alexander’s Completes Sale of Kings Plaza Mall for $751 Million and Declares Special Long-Term Capital Gain Dividend of $122.00 Per Share,” Alexander’s, Inc, November 30, 2012.)
Thanks to the big influx of cash, Alexander’s board declared a special dividend of $624.0 million, or $122.00 per share.
Alexander’s Stock Thumping S&P 500
The company’s dividend payout has been reliable, but Alexander’s stock has experienced some volatility, at least since the pandemic. From the start of 2020 through May 2023, ALX stock lost 33% of its value.
However, since May 2023, the stock has been performing well, rising approximately 60%. Alexander’s stock is also up 18.7% year to date and 41.9% year over year.
Part of those big gains can be attributed to strong financial results and a dovish Federal Reserve, which hinted in early November 2023 that rate hikes were over for this cycle.
In December, the Fed said that interest-rate cuts were on the horizon. Those rate cuts haven’t materialized yet, but virtually everyone on Wall Street thinks the Fed will announce a rate cut this September.
Chart courtesy of StockCharts.com
The Lowdown on Alexander’s Stock
Alexander’s, Inc. continues to be a great REIT with a portfolio of properties in New York City. It’s been reporting strong earnings and FFO growth, both of which help support its high-yield dividend.
And earnings growth and a reliable dividend might help explain why Alexander’s stock has high institutional ownership of 31.85% and extremely high insider ownership of 58.3%. The high insider interest entices the company to deliver strong results.