With its dividend return and an expected long-term FFO growth rate of around 8.6%, Tanger Factory Outlet Centers appears to be a promising pick for investors seeking both growth and income.
Impressive Earnings Story
Tanger Factory Outlet Centers is scheduled to release its fourth-quarter 2012 results on Feb 12. The Zacks Consensus Estimate for FFO is currently pegged at 45 cents per share.
On Oct 30, the company reported solid third-quarter FFO per share of 42 cents, topping the year-ago FFO by 10.6% and in line with the Zacks Consensus Estimate. Total revenues increased 8.7% year over year to $90.5 million. Operating Income advanced 10.9% to $29.0 million. Same center net operating income increased 5.6% from 5.0% a year ago, while tenant comparable sales for the quarter advanced 7.0%.
With solid results in the third quarter, Tanger Factory Outlet Centers now expects FFO per share between $1.61 and $1.63 for 2012, reflecting an expected growth of 6% year over year in same-center net operating income.
FFO Estimates Moving Higher
The Zacks Consensus Estimate for 2012 is up 0.6% over the past 90 days to $1.63 per share, suggesting year-over-year growth of roughly 13.2%.
Moreover, the Zacks Consensus Estimate for 2013 is currently $1.82, which increased 2.2% in the last 90 days, implying year-over-year growth of 11.4%.
Tanger Factory Outlet Centers has been paying dividends regularly and last hiked its quarterly dividend rate by 5.0% to 21 cents per share for the first quarter of 2012. Based on this rate, the annual yield comes to 2.4%.
Shares of Tanger Factory Outlet Centers currently trade at 19.5x 12-month forward earnings, a 7.1% premium to the peer group average of 18.2x. Its price to book ratio of 6.5 is at a significant premium to the peer group average of 1.8. Given its strong fundamentals, the premium valuation is justified.
Moreover, the company has a trailing 12-month ROE of 9.2%, compared with the peer group average of 4.9%. This implies that the company reinvests its earnings more efficiently than its peer group.
The company has been continuously outperforming the S&P 500 since mid-April 2012, and has also been outperforming its 200 days moving averages over the past year. The stock has gained 24.3% in a year’s time, compared with the S&P 500’s return of 13.7%.
Headquartered in Greensboro, North Carolina, Tanger Factory Outlet Centers, Inc. is a real estate investment trust. The company was founded in 1981 and currently operates and owns, or has an ownership interest in, a portfolio of 43 upscale outlet shopping centers in 26 states coast to coast and in Canada. It has a market cap of about $3.3 billion. Among other companies in the same industry: AmREIT, Inc. (AMRE) has a Zacks Rank #1 (Strong Buy), while Taubman Centers, Inc. (TCO) and Simon Property Group Inc. (SPG) hold Zacks Rank #2s (Buys).
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