Getty Realty Stock: Undervalued 6.5%-Yielder Has 40%+ Upside
February 23, 2024
GTY Stock Has a Bright Outlook for the Next Year
With the Federal Reserve expected to start making interest rate cuts in the coming months, income-starved investors have been turning their attention back to real estate investment trusts (REITs).
And for good reason.
High interest rates make it more expensive for REITS and other businesses to borrow money and service their debt. REITs typically take on debt to make acquisitions, which are an important part of their growth strategies. Therefore, lower interest rates are great news for REITs like Getty Realty Corp. (NYSE:GTY).
Moreover, with interest rates coming down, many investors will be looking for reliable, high-yield dividend stocks to pad their portfolios.
There are plenty of reasons to be bullish on Getty Realty stock these days. The company recently reported another quarter of wonderful financial results and a full year of record-high investment activity. It also raised its quarterly dividend and provided solid guidance for 2024.
Getty Realty Corp.’s active acquisition strategy helps diversify its tenant base, property-type mix, and geographic reach. Since January 2016, Getty Realty Corp. has acquired 411 properties for $1.2 billion.
In 2022, the company invested $157.5 million in 52 properties. (Source: “Getty Realty Corp. Announces Fourth Quarter and Full Year 2022 Results,” Getty Realty Corp., February 22, 2023.)
In 2023, it invested a record-high $326.3 million in 81 properties, including 40 express tunnel car washes, 13 auto service centers, 12 convenience stores, and three drive-through quick-service restaurants. (Source: “Corporate Profile: February 2024,“ Getty Realty Corp., last accessed February 21, 2024.)
Just in the fourth quarter of 2023, the company invested $61.8 million in 38 properties and completed two redevelopment projects. (Source: “Getty Realty Corp. Announces Fourth Quarter and Full Year 2023 Results,” Getty Realty Corp., February 14, 2024.)
As of February 14, 2024, the company had a committed investment pipeline of more than $67.0 million for the development and/or acquisition of 36 express tunnel car washes, convenience stores, and auto service centers.
GTY stock may be down by 16% over the last year and down by almost seven percent year-to-date (as of this writing), but its outlook remains bright. Wall Street analysts have predicted that shares of Getty Realty Corp. will climb by anywhere from 10% to 43% over the next year.
Chart courtesy of StockCharts.com
About Getty Realty Corp.
Getty Realty is the leading publicly traded U.S. net lease REIT that specializes in the acquisition, financing, and development of convenience stores, gas stations, and other single-tenant retail real estate (e.g., car washes, auto service centers, and auto part retailers). (Source: “About Us, “Getty Realty Corp., last accessed February 21, 2024.)
As of December 31, 2023, the company’s $2.2-billion real estate portfolio included 1,093 properties in 40 states and D.C. (Source: “Corporate Profile: February 2024, “Getty Realty Corp., op. cit.)
The majority of those properties (67.2%) were made up of convenience stores and gas stations, followed by car washes (17%), legacy gas and repair facilities (9.5%), auto service centers (4.4%), drive-through retailers (1.1%), and auto parts and other (0.8%).
In 2023, 60% of the company’s properties were located in the top 50 metropolitan statistical areas, and 69% of its properties were corner lots. With a 99.8% occupancy rate, the company’s e-commerce-resistant and recession-resistant retail properties come with 1.7% annual rent escalations.
A few of Getty Realty Corp’s tenants are 7-Eleven, BP plc (NYSE:BP), Circle K, CrossAmerica Partners LP (NYSE:CAPL), and Global Partners LP (NYSE:GLP).
Base Rental Income Jumped 9.5% in 2023
For the fourth quarter of 2023, Getty Realty reported net earnings of $0.30 per share, funds from operations (FFO) of $0.51 per share, and adjusted FFO (AFFO) of $0.57 per share. (Source: “Getty Realty Corp. Announces Fourth Quarter and Full Year 2023 Results,” Getty Realty Corp., February 14, 2024.)
In the fourth quarter, the company’s base rental income increased by 12.4% to $42.5 million, from $37.8 million in the same period of 2022.
For full-year 2023, Getty Realty Corp. reported net earnings of $1.15 per share, FFO of $2.06 per share, and AFFO of $2.25 per share. Also in 2023, the company’s base rental income rose by 9.5% to $161.8 million, compared to $147.8 million in 2022.
Commenting on the results, Christopher J. Constant, Getty Realty Corp.’s president and CEO, said, “We are extremely proud of our financial results in 2023, which saw us grow base rental income by nearly 10% and AFFO per share by more than 5%, reflecting strong execution of our growth strategy.” (Source: Ibid.)
Commenting on the future, he said, “As we look to 2024 and beyond, we expect to selectively add to our investment pipeline and utilize our strong credit profile, including increased cash flow from our growing portfolio, to deliver sustained earnings and dividend growth to our shareholders.”
To that end, management reaffirmed its 2024 AFFO guidance in the range of $2.29 to $2.31 per diluted share.
Getty Realty Corp. Increased Dividend for 12th Straight Year
Getty Realty’s high property occupancy rate, durable rental income stream, excellent rent coverage ratios, and stable tenant credit profiles have helped it provide investors with reliable, growing, high-yield dividends for 12 years (and counting).
On January 11, Getty Realty stock paid cash dividends of $0.45 per share, a 4.65% increase over the $0.43 it paid out in October 2023. (Source: “Dividends,” Getty Realty Corp., last accessed February 21, 2024.)
As of this writing, that dividend level works out to a yield of 6.58% for GTY stock.
The Lowdown on Getty Realty Stock
Getty Realty Corp. is a terrific specialty REIT that operates in an industry that’s recession-resistant, e-commerce-resistant, and pandemic-resistant. From 2015 through 2023, its AFFO margin increased by 16.1%, its AFFO per share expanded at a compound annual growth rate (CAGR) of 5.2%, and its dividends per share rose at a CAGR of 5.3%.
As mentioned earlier, in 2023, the company more than doubled its investment activity to a record-high $326.0 million. So far in 2024, it has a committed investment pipeline of more than $67.0 million.
For passive income investors, management recently increased GTY stock’s high-yield dividend for the 12th straight year.
