American Finance Trust Inc Up 30% in 2021 & Provides 10.1% Dividend
October 15, 2021
AFIN Stock: Rising Price & Safe Dividend
If necessity is the mother of invention, American Finance Trust Inc (NASDAQ:AFIN) is the mother of real estate investment trusts (REITs), since it acquires “necessity-based” real estate.
The company acquires and manages a diverse portfolio of primarily service-oriented, retail, and distribution-related commercial real estate properties in the U.S.
The REIT buys freestanding, single-tenant properties that are net leased to investment-grade tenants and other creditworthy tenants. It also invests in other net lease properties and anchored, established core retail properties, including power centers and lifestyle centers.
As of this writing, American Finance Trust’s $4.1-billion portfolio is made up of 939 properties in 47 states, covering 19.9 million rentable square feet (roughly 345 NFL fields). This provides the company with annual straight-line rent (SLR) of $286.0 million. (Source: “Portfolio Overview,” American Finance Trust Inc, last accessed October 14, 2021.)
The properties’ occupancy rate is 94.9%, with weighted average remaining lease terms of 8.5 years. Like any good landlord, the company raises its rent. Annual rent escalators with a weighted average of 1.2% per year provide the company with contractually embedded rent growth.
All that bodes well for American Finance Trust stock investors.
American Finance Trust Inc’s Top 10 Tenants |
||
|
Tenant |
Property Type |
% of SLR |
|
Sanofi SA |
Pharmaceuticals |
6% |
|
Truist Financial Corp |
Retail |
6% |
|
Fresenius Medical Care AG & Co. |
Health Care |
5% |
|
Mountain Express Oil Company |
Retail |
5% |
|
Americold |
Distribution |
4% |
|
Stop & Shop Supermarket LLC |
Retail |
3% |
|
Bob Evans Restaurants, LLC |
Retail |
3% |
|
Dollar General Corp. |
Retail |
3% |
|
Home Depot Inc |
Retail |
2% |
|
Fast Stop |
Retail |
2% |
(Source: “Top 10 Tenants,” American Finance Trust Inc, last accessed October 14, 2021.)
American Finance might have enviable tenants, but not even a top investment-grade business is prepared for a black swan event like COVID-19. During the second quarter of 2020, which was the heart of the pandemic-related lockdown, American Finance Trust ran into a little short-term trouble, collecting just 84% of its rents.
It has been going uphill since then. Over the ensuing quarters, the company continued to increase its rent collection figures, which, as of the second quarter of 2021, stood at 100%. That included both contractual rents and deferred rents.
Concerns about American Finance Trust Inc’s ability to collect rent sent the price of AFIN stock careening lower in March 2020. The same thing happened across the entire REIT universe. If the global economy is tanking, businesses are shuttering their doors, and people are forced to quarantine, how are REITs going to survive?
They did survive, but some have rebounded more quickly than others.
There are still concerns about how the highly contagious Delta variant of the coronavirus will affect the economic rebound. Inflation isn’t helping when it comes to spending, either.
As a result, American Finance Trust stock has rebounded, but it still has room to run.
AFIN stock is up by:
- 30% year-to-date
- 50% year-over-year
- 145% since bottoming in March 2020
American Finance Trust stock needs to climb by 30% to get to its pre-coronavirus-fueled sell-off level and climb by 50% to get to its record high of September 2018.
Chart courtesy of StockCharts.com
The future is looking bright for American Finance Trust’s business, share price, and dividends.
Second-Quarter Results
In the second quarter of 2021, the REIT announced that its revenue increased by 8.9% year-over-year to $74.9 million. Its cash net operating income (NOI) grew by 19.7% to $65.4 million from $54.7 million in the second quarter of 2020. (Source: “American Finance Trust Announces Second Quarter 2021 Results,” American Finance Trust Inc, August 4, 2021.)
The company’s funds from operations (FFO) increased by 13.0% to $25.1 million ($0.23 per diluted share) in the second quarter of 2021, from $22.2 million ($0.21 per diluted share) in the second quarter of 2020.
American Finance Trust Inc’s adjusted funds from operations (AFFO) grew by 35.4% to $28.7 million ($0.26 per share) from $21.2 million ($0.20 per diluted share) in the prior-year second quarter.
Michael Weil, CEO, commented, “Our Second Quarter results highlight the strength, predictability and performance of our best-in-class service-retail oriented portfolio and the result of our focus on constructing an investment-grade balance sheet.” (Source: Ibid.)
Weil noted that American Finance Trust Inc’s leasing activity in its multi-tenant portfolio contributed to a 35% year-over-year increase in its AFFO and drove the executed occupancy of its shopping centers to 89%.
During the three months ended June 30, the REIT acquired 17 properties for an aggregate contract purchase price of $26.4 million, at a weighted average capitalization rate of 7.1%.
American Finance Trust’s acquisition pipeline should be heating up in the coming quarters.
In early October, the company announced that it had increased its unsecured revolving credit facility from $540.0 to $815.0 million. The credit line may be further expanded to $1.3 billion through an in-built accordion feature in the agreement. (Source: “American Finance Trust Completes $815 Million Credit Facility Recast, Upsized From Previous $540 Million Credit Facility,” American Finance Trust Inc, October 4, 2021.)
Dividend Announcement
In addition to reporting strong financial results with performance metrics either returning to or exceeding pre-pandemic levels, the company has continued to reward income hogs with reliable, high-yield dividends.
On October 1, the company announced a fourth-quarter dividend of $0.2125 per share, or $0.85 annualized. At the current price of AFIN stock, that works out to a yield of 10.1%. (Source: “American Finance Trust Announces Common Stock Dividend for Fourth Quarter 2021,” American Finance Trust Inc, October 1, 2021.)
The Lowdown on American Finance Trust Inc
American Finance Trust Inc is an excellent, diverse REIT that provides investors with both share-price growth and secure, high-yield dividends.
As the economy continues to recover, American Finance Trust continues to grow and optimize its property portfolio. Moreover, as noted above, the company’s performance metrics have returned to or exceeded pre-pandemic levels.
