Shares of DDR Corp. (DDR) scaled a new 52-week high of $19.55 on Jan 14. The stock closed at $19.52, reflecting a solid return of 29.4% over the past one year. The trading volume for the session was nearly 4.6 million shares.
Broader REIT market was optimistic as well, driven by expectations for a continued low rate environment for some more time given the modest growth pace of the economy.
Despite scaling such high, we believe that this retail real estate investment trust (“REIT”) can prove to be a good choice for investors, given the improving market fundamentals, favorable rate environment and recent positive developments.
Growth Drivers
As a matter of fact, DDR has hit headlines for a number of reasons recently. Last week, the company unveiled its outlook for 2015. The company projects its operating funds from operations (“FFO”) per share to come within $1.20–$1.25 for 2015. This is ahead of the company’s 2014 operating FFO per share outlook of $1.15–$1.17.
DDR also announced an 11% hike in its quarterly dividend rate to 17.25 cents per share from 15.5 cents paid earlier. The company has been consistent in enhancing its shareholder’s wealth with dividend payouts. In fact, the latest increase reflects the company’s fifth straight year of greater than 10% dividend growth.
DDR also announced that it completed the year 2014 as a net seller of assets amid solid pricing for its properties, and closed $4.3 billion of transactions in the year. In 2015, DDR expects to close acquisitions and dispositions worth $250 million each.
Further, the company assumes $200 million of re/development activities in 2015 which are expected to take place mainly in the second half of the year. Therefore, going forward, we believe that the company’s efforts toward portfolio-repositioning and capital-recycling would help it ride on the growth trajectory.
Finally, DDR’s third-quarter 2014 operating FFO per share of 29 cents was in line with the Zacks Consensus Estimate and a cent above the prior-year quarter figure. Notable leasing momentum, same-store net operating income (“NOI”) and portfolio strengthening activities aided the results.
DDR is slated to release its fourth-quarter and full year 2014 results after the market closes on Feb 11, 2015. The Zacks Consensus Estimate currently stands at 31 cents per share for the quarter and $1.16 for the year.
However, over the last 30 days, the Zacks Consensus Estimate for 2014 remained unchanged at $1.16, while that for 2015 moved 4 cents down to $1.23. DDR currently has a Zacks Rank #4 (Sell).
Other Stocks Scaling Highs
Other real estate industry stocks that have scaled 52-week highs on Jan 14 include Avalonbay Communities Inc. (AVB), Essex Property Trust Inc. (ESS) and Simon Property Group Inc. (SPG).
Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.
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