Global Net Lease Stock Is a Reliable 12.4%-Yielding Global REIT Stock
November 22, 2022
Why GNL Stock Should Be on Investors’ Radar
With interest rates on the rise, many investors are spooked by real estate investment trusts (REITs) right now. While rising interest rates can certainly be bad for some mortgage-backed REITs, many commercial REITs ink multiyear leases with rate hikes baked in. That’s one of the things that make Global Net Lease Inc (NYSE:GNL) such a great company.
The New York City-based firm owns 310 net lease properties in 11 countries, covering 39.5 million rentable square feet. That’s equivalent to about 686 NFL football fields. (Source: “Portfolio Overview,” Global Net Lease Inc, last accessed November 21, 2022.)
The company leases out its properties to 141 tenants in 51 industries. Here are some of the more interesting statistics of its real estate portfolio:
- Six percent of the portfolio has a remaining weighted-average lease term of 8.1 years
- Three percent of the portfolio contains contractual rent increases based on annualized straight-line rent
- Three percent of the portfolio’s annualized straight-line rent is derived from investment-grade and implied-investment-grade tenants
- 66% of the portfolio is in the U.S. and Canada and 34% is in Europe (based on annualized straight-line rent)
- 41% of the portfolio is classified as office, 56% is industrial/distribution, and three percent is retail (based on annualized straight-line rent)
Building a global real estate empire means continually growing your international footprint. In the third quarter, Global Net Lease Inc executed one new lease, expanded one lease, and extended two leases. These leases, which are for properties in the U.S and U.K., have a new weighted-average remaining lease term of 9.1 years. That’s an increase of almost four years, compared to the old lease terms. (Source: “Global Net Lease Announces Nearly 850,000 Square Feet of New and Renewed Leases in Third Quarter, Over 3.5 Million Square Feet Year to Date,” Global Net Lease Inc, October 12, 2022.)
Year-to-date, Global Net Lease has signed new, renewed, and expansion leases totaling 3.6 million square feet. The leases have a weighted-average remaining term of 9.4 years, which increases the amount of straight-line rent these tenants are required to pay by approximately $1.0 million.
The leases that have been signed in 2022 are for properties in the U.S., U.K, France, and the Netherlands. The tenants include investment-grade organizations such as FedEx Corporation (NYSE:FDX), the State of Indiana, the U.S Government, and Whirlpool Corporation (NYSE:WHR).
“We are continuing the leasing momentum we’ve seen in this year,” said James Nelson, Global Net Lease Inc’s CEO. “Building on the strong relationships we have established with our tenants over time, our asset management team has been very successful signing leases this year and continues to build a strong pipeline of new and renewal leases in North America and Europe.” (Source: Ibid.)
Global Net Lease Inc Reports High Amount of Leasing Activity
For the third quarter ended September 30, Global Net Leasing announced that its revenue slipped by 3.3% year-over-year to $92.6 million. On a constant-currency basis, its revenue went up by two percent to $97.5 million. (Source: “Global Net Lease Reports Third Quarter 2022 Results,” Global Net Lease Inc, November 3, 2022.)
The company’s third-quarter 2022 net income was $9.7 million, or $0.09 per share, up significantly from its third-quarter 2021 net income of $2.4 million, or $0.02 per share. Its net operating income in the third quarter was $84.8 million, down slightly from $89.0 million in the same prior-year period.
Global Net Lease Inc’s core funds from operations (FFO) climbed in the third quarter of 2022 by 9.6% to $48.3 million, or $0.47 per share, versus $44.1 million, or $0.43 per share, in the third quarter of 2021. Its adjusted FFO in the third quarter was $41.3 million, or $0.40 per share, compared to $44.3 million, or $0.44 per share, in the same prior-year period.
“I am very pleased with our strong leasing of nearly 850,000 square feet in the third quarter, bringing our year-to-date activity to 3.6 million square feet,” said Nelson. “We are also seeing strength in the growing pipeline of accretive acquisition opportunities we have uncovered.” (Source: Ibid.)
He continued, “With our strong leasing efforts, we have added $117 million of net new straight-line rent over the new weighted-average remaining lease term of 9.3 years, up from 3.5 years. With our global focus on owning mission-critical, industrial and office properties, we believe we are well positioned to extract additional value over the long term.”
Third-Quarter Distribution of $41.7 Million
During the third quarter, Global Net Lease Inc maintained its enviable dividend of $0.40 per share, for a yield of 12.4%. This ultra-high yield isn’t the result of the company’s share price taking a nosedive. The company has a history of paying high-yield dividends. Its trailing annual yield is 14.4% and its five-year average yield is 10.8%.
Global Net Lease Inc’s reliable dividends can help cushion any blows Global Net Lease stock may suffer in terms of price. Moreover, the dividends can help investors crush inflation, which is at a decades-high level.
Like the broader market, GNL stock has had a bumpy ride in 2022. As of this writing, Global Net Lease stock is:
- Up by 21% over the last month
- Down by 6.5% year-to-date
- Down by 5.5% year-over-year
That’s a little frenetic, but far better than the S&P 500, which is up by 10% over the last month but down by 17% year-to-date and 16% year-over-year. And you can forget about the S&P 500 giving you inflation-thumping dividends.
Chart courtesy of StockCharts.com
The outlook for GNL stock is bullish. In spite of its big gain over the last month (which was probably due to a bear-market rally), Global Net Lease stock has additional room to run.
Of the analysts providing a 12-month share-price target for Global Net Lease Inc, their average estimate is $17.00 and their high estimate is $19.00, pointing to potential gains in the range of 34% to 50%.
The Lowdown on Global Net Lease Inc
Global Net Lease Inc is a fabulous REIT with a huge international presence. The company has been reporting significant leasing activity, growing its pipeline, adding millions of dollars in new straight-line rent, and increasing its weighted-average remaining lease terms.
Though limited by its hedging program, the company has experienced headwinds from global currency fluctuations, but that should change over the coming quarters.
Until the macroeconomic headwinds subside, investors can take solace in knowing that GNL stock will reward them with reliable, inflation-beating quarterly payouts. That’s like free money without the hassle of directly dealing with tenants.
