Here's Why You Should Hold on to SITE Centers (SITC) Stock Now
SITE Centers Corp.’s SITC high exposure to necessity business component at its retail properties has helped to operate all its assets during the pandemic. However, uncollected rent and reserves related to the pandemic have affected its performances in the recent quarters.
Notably, 56% of the company’s tenants are deemed to be in essential business,while 80% of its assets are anchored by grocers or well-known discount traffic drivers. In fact, the majority of the tenants at its shopping centers cater to day-to-day consumer needs, with a focus on value and convenience retailers. Significant exposure to essential retail businesses at the company’s centers is advantageous in the current environment.
The retail REIT has been pursuing an aggressive capital-recycling program, in line with which it is divesting slow-growth assets and redeploying the proceeds for the acquisitions of premium U.S. shopping centers and redevelopment activities. In fact, through its active redevelopment projects, it aims to expand, improve and re-tenant various projects.
The company has ample liquidity and an investment-grade balance sheet to support such moves. Moreover, in wake of the coronavirus pandemic, SITE Centers took some proactive measures to bolster its liquidity profile and reduce debt.
However, the pandemic and measures undertaken to curb its spread impacted businesses of physical stores, as such outlets widely depend on customer traffic but consumers are avoiding crowded public spaces. This, in turn, resulted in the deterioration in the financial condition and liquidity of the tenants, impairing their ability to pay rents. As a result, retail REITs, which have already been battling store closures and bankruptcy issues, are feeling the heat. Apart from SITE Centers, these adverse conditions are affecting other retail REITs, including Macerich MAC, Simon Property SPG and Kimco KIM.
Additionally, amid the pandemic, SITE Centers prioritized maintaining maximum flexibility for its value-enhancing redevelopment endeavors over dividend payments. Hence, it suspended the second- and third-quarter dividends.
Moreover, the disposition of assets, while a strategic fit for long-term growth, will likely have a dilutive effect on near-term earnings.
Shares of this Zacks Rank #3 (Hold) company have plunged 51.9% compared with the industry’s decline of 28.2% over the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Kimco Realty Corporation (KIM) : Free Stock Analysis Report
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SITE CENTERS CORP. (SITC) : Free Stock Analysis Report
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