The REIT continues to grow.
Shares of Agree Realty (ADC -1.06%) jumped 11.4% in July, according to data provided by S&P Global Market Intelligence. The real estate investment trust (REIT) benefited from an improved growth forecast and credit rating upgrade last month.
Growing faster
Agree Realty reported solid second-quarter results last month. The retail REIT posted a 6.4% rise in its adjusted funds from operations (FFO) per share in the period. The company has benefited from rising rental income and its steadily expanding portfolio. It invested $203 million into 70 retail net lease properties in the second quarter, bringing its first-half total to $343 million across 102 properties.
Even with all those acquisitions, the REIT ended the second quarter with strong liquidity. It took advantage of its rising stock price to sell 3.2 million shares, raising $194 million. In addition, its banks expanded its credit facility to $1.25 billion and extended its maturity until 2029. These factors enabled it to raise $650 million of capital, boosting its total liquidity to $1.7 billion.
Agree Realty ended the second quarter with a low leverage ratio of 4.1 times. That low level led credit rating agency S&P Global to upgrade the REIT’s bond rating to BBB+ from BBB last month. That higher investment-grade rating will make it even easier for the REIT to access lower-cost capital in the future.
Agree Realty’s strong liquidity and balance sheet gave it the confidence to increase its acquisition guidance for this year. It now expects to spend $700 million on new property purchases, a $100 million increase from its previous guidance. That also enabled the REIT to boost its full-year FFO forecast. “Given accelerating investment activity and the strong performance of our portfolio year-to-date, we are raising our 2024 AFFO per share guidance to a range of $4.11 to $4.14, reflecting 4.4% growth at the midpoint,” stated CEO Joey Agree in the second-quarter earnings report.
Is Agree Realty a buy after last month’s rally?
After rallying last month, Agree Realty’s dividend yield has fallen to 4.2%. That’s still well above the S&P 500‘s average of around 1.4%. Meanwhile, with its share price up to around $71.50 apiece, it trades at about 17 times its 2024 FFO forecast, a reasonable valuation for a REIT. Because of that, it’s still an attractive buy for those seeking income. With a strong balance sheet and expanding portfolio, Agree Realty should be able to grow its high-yielding payout in the future.
Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends S&P Global. The Motley Fool has a disclosure policy.
