In good times and bad, people love a bargain. Today we have an opportunity to own a company who provides bargains at a bargain –with the possibly of 40% growth in stock price while earning a dividend of 6.2% along the way.
Understand, I’m not someone who loves shopping, and evidence of what some call the retail armageddon is clear. Thousands of stores are closing every year, bankruptcies for retailers are at an all time high, and ecommerce hit it’s crescendo last holiday. I never would have believed that I would be recommending a stock based on brick and mortar retail, but amidst the rubble and destruction there are winners, and Tanger Factory Outlet Centers is one worthy of our consideration.
eCommerce hasn’t put a dent in this outlet powerhouse who’s been in business since 1981. Outlet stores in general have doubled their sales over the past 5 years to $50 billion, and Tanger, who has properties in both the US and Canada continues to grow as well through thoughtful planning and execution. With high profile tenants such as Nike and Polo Ralph Lauren, their occupancy rates have not dipped below 96% since the company went public 1993.
CEO Steven B. Tanger, in their Annual Report, proudly reported their 14th consecutive year of net operating income growth and their 24th year of consecutive dividend increases.
Tanger is still family owned, and the business is organized as a real estate investment trust (REIT). If you’re familiar with REIT’s you know this model doesn’t pay corporate income taxes, but is required to return most of it’s cash flow back to investors via distributions or dividends. Their annual payout per share has only grown since 1993 as well, from $0.1338 to it’s current day $1.3525. At it’s current price, this is a 6.2% yield – not too shabby.
Our opportunity here is that Tanger’s share price has temporarily fallen because Wall Street has mistakenly lumped it in the same basket as retail stocks most of which I wouldn’t touch with any length of pole. Today we can load up on this bargain below $25 (it’s at $23 as of this writing) and wait for it to return to it’s 2017 high of over $37 per share.
So what would investing in 108 shares today look like in 5 years’ time?
Investment cost: $2,484; 108 shares @ $23/share, 6.2% dividend yield reinvested for 5 years
You would end up with $3,403.66 for a total gain of 37.02%. Since this is over 5 years, that would make your average annual gain 7.40% and this is doesn’t even factor in any rise in share price, which could easily be in the double digits.
ACTION: Buy shares of Tanger Factory Outlet Centers (SKT) up to $24.50