Commercial real estate investments are attracting investor attention, and this company is proving to be a strong player in the market. With a dividend yield of nearly 8% and an increase in net income per diluted share of an amazing 142.9% compared to the same period last year, it's clear that this company is in a strong position to generate steady returns.

One of the things that catches the eye is the recent increase in the investment firm BlackRock's stake in this company's stock to 15.20%. This significant acquisition underlines the confidence in its business model and future growth potential. An investment by a reputable asset manager such as BlackRock signals positive expectations for the company's long-term performance and its ability to deliver stable returns to investors.

Company introduction

CTO Realty Growth $CTO, headquartered in Winter Park, Florida, is an American real estate investment company focused on commercial real estate. Its business model is focused on owning and managing properties in key locations across the United States where demand for commercial space is growing. CTO owns office, retail and mixed-use properties in fast-growing regions with high economic potential, such as the Southeast and Southwest U.S., enabling it to generate stable income over the long term.

CTO's primary source of revenue is from the leasing of these commercial spaces, which are occupied by long-term tenants. Clients range from retail chains to corporations, providing relatively stable cash flow. This approach is popular with investors because long-term leases with reputable companies minimize vacancy risk and provide predictable income. In addition to leasing, CTO occasionally makes sales of properties that have reached their expected value or no longer fit the company's strategy, allowing it the flexibility to respond to current market conditions while raising capital for further investment.

CTO's history dates back to the 20th century and has undergone several key acquisitions and strategy changes in recent decades that have strengthened its position in the commercial real estate market. More recently, it has focused on expanding its portfolio into locations with favorable demographics and economic trends, and has emphasized a diversity of tenants and property types. Significant acquisitions are taking place primarily in areas with growing populations and economic activity, helping the firm keep pace with the demand for modern commercial space.

CTO is attractive to investors due to its emphasis on stable returns and long-term holdings of valuable properties. This conservative but flexible approach includes regular dividend payments, which attracts income-focused investors. CTO strives to maintain high occupancy and strengthen its presence in dynamic markets, while taking into account the increasing demands for sustainability and energy efficiency. By upgrading and optimizing its properties, CTO ensures both stable income and long-term portfolio value.

High-quality real estate investments have contributed to the company's long-term share value, which is up nearly 12% since the beginning of the year and more than 15% over the past 12 months. While these gains have lagged the broader market, CTO makes up for this shortfall with a strong dividend.

The company's dividend is significant; the most recent announcement on Aug. 20 shows a payment of 38 cents per share, with an annual yield of $1.52, representing nearly 8% yield. The company's financial performance supports this dividend ; in the second quarter of 2024, CTO's Funds From Operations (FFO) was 45 cents per share, with total revenue of $28.85 million, a nearly 11% year-over-year increase.

Dividend

When analyzing dividends, it is important to consider total shareholder return (TSR), which includes not only changes in share price but also the value of dividends paid, if reinvested. In the case of CTO Realty Growth, the TSR over the past year is 27%which exceeds the return on share price alone. This result is largely driven by the regular dividend payments that CTO makes (on a quarterly basis).

Currently, CTO offers a dividend yield of 7.84%. This yield indicates that the company is focused on returning a portion of its earnings to shareholders. Such a policy may have a positive effect on investor confidence and potentially help stabilize the stock price in the future.

TSR's analysis shows that CTO Realty Growth achieved a solid return, although the share price growth was slower. A strong dividend policy and stable earnings may play a significant role in the company's market appeal. While it is important to be mindful of the risks associated with the investment, dividends can be an interesting aspect for shareholders that adds to the overall picture of the company's performance.

How was the company's last quarter?

The company achieved net income per diluted share of $0.17, a significant increase of 142.9% over the same period last yearwhen net income was $0.07 per share. Core FFO increased to $0.50 per share, a 6.4% increase, while AFFO was $0.51 per share, a 6.3% increase.

As part of its investment activities, the company invested a total of $191.3 million in the quarter for an average return of 9.5%. Key acquisitions included three open shopping centers that were purchased for $137.5 million, namely Carolina Pavilion in Charlotte, Millenia Crossing in Orlando and Lake Brandon Village in Tampa. In addition, CTO has created a $43.8 million mortgage loan secured by more than 100 acres of land zoned for more than 2 million square feet of mixed-use development in Herndon, Virginia.

The company also completed the sale of one property, Jordan Landing in Utah, for $18 million with exit capitalization rates of 9.2%. Overall, for the nine months ended September 30, 2024, CTO sold two retail properties for $38 million, generating a gain of $3.8 million.

On an operating income basis, Same-Property NOI increased 6.3% to $16.8 million in the third quarter and increased 5.1% to $44.6 million for the nine months. The Company signed 20 leases totaling 201,806 square feet in the quarter, with average base rent increasing to $21.86 per square foot, a 12.0% increase over the prior year period.

On the financing side, CTO raised net proceeds of $125.7 million through an automatic share purchase (ATM) program, and entered into new five-year unsecured term loans of $100 million with an initial effective interest rate of 4.7%. As of September 30, 2024, the Company had $213 million of available liquidity and reduced its debt levels.

So far, 2024 has been an exceptional year for CTO in terms of growth and investment activity, which has contributed to the growth of its portfolio and expanded opportunities in promising areas of retail. The company's CEO, John P. Albright, expressed satisfaction with the results, stating that the majority of the investment activity was funded through the disciplined use of the ATM program, which is indicative of the company's strategic capital management and continued growth in the marketplace.

Within its retail-focused segment, CTO has a higher dividend yield than many of its competitors. This means that CTO stock pays a more attractive amount in dividends compared to its price.

Long-term results

Revenues and expenses: The company has seen a significant increase in total revenue, which in the last 12 months (TTM) was $118,662,000, an increase of 8.27% from the previous year's revenue of $109,119,000. This is a clear upward trend compared to 2022 ($82,320,000) and 2021 ($70,272,000).

The cost of revenue has increased to $32,486,000 in TTM (over the last 12 months), which is also an increase from $30,178,000 in 2023. This growth is relatively stable compared to previous years when the cost was $22,857,000 in 2022 and $22,430,000 in 2021. This trend indicates that the Company is managing its costs more effectively in the context of growing revenues.

Gross profit amounted to USD 86,176,000, an increase of 9.72% compared to 2023. This increase in gross profit is a positive sign as it demonstrates the company's ability to generate profit even with rising revenue costs.

Net profit to shareholders rose to $14,166,000 in TTM, a significant increase from $758,000 in 2023. This jump indicates that the company has overcome previous obstacles and has restored profitability. Compared to previous years (e.g., $1,623,000 in 2022 and $27,615,000 in 2021), net income is trending positively.

CTO x Competitors

The company has an EV/EBITDA (TTM) of 15.18, which is lower than the sector average of 17.58, suggesting it is more affordable. On the other hand, the EV/EBIT (TTM) value for the firm is 45.66, which is significantly higher than the sector average of 34.35, indicating that it is considered more expensive in this regard.

In terms of Price/Sales (TTM), the firm has a value of 3.81, while the sector average is 4.95, indicating that the firm is relatively cheaper. The firm's Price/Book (TTM) stands at 0.98, which is below the sector average of 1.59

The Price / Cash Flow (TTM) value is 11.12 for the firm, while the sector average is 14.04, which means that the firm is again more cost effective in this regard. The Dividend Yield (TTM) for the firm is 7.84%, which is significantly higher than the sector average of 4.30%, indicating that the firm offers a more attractive dividend payout.

Looking at the total debt-to-equity ratio (TTM), the firm has a value of 89.66%, which is lower than the sector average of 97.92%, indicating better financial stability. On the other hand, the long-term debt to assets ratio (TTM) is 43.54% for the firm, while the sector average is 41.11%, indicating that the firm is more leveraged.

In terms of returns, ROA (Return on Assets) is 1.62%, which means the firm generates a profit of 1.62% on total assets. ROE (Return on Equity) is 3.81%, indicating that the firm is making a profit of 3.81% for every dollar of equity, which is a relatively low number and suggests that the firm may have room for improvement in its use of equity. ROIC (Return on Invested Capital) is 1.93%, which shows how efficiently the firm uses invested capital to generate profits.

BlackRock trusts the company

On August 31, 2024, BlackRock made a significant transaction when it purchased an additional 1,530,055 shares of CTO Realty Growth stock. This purchase increased BlackRock's total stake to 3,503,913 shares, representing 15.20% of CTO. The shares were purchased at a price of $19.02 apiece. Although this was a significant volume of shares, the transaction did not have a significant immediate impact on BlackRock's portfolio given its size and diversification.

BlackRock's recent stock purchases indicate a strategy to invest in stocks with value and growth potential. CTO Realty's solid GF Score indicates above-average performance going forward, which may attract investor interest. An investment by a major player such as BlackRock may signal confidence in CTO's business model and future prospects, which may influence the perception of other investors.

BlackRock's increased stake in CTO Realty Growth reflects a strategic move to take advantage of growth opportunities in the real estate sector. While this transaction has minimal immediate impact on BlackRock's portfolio, the long-term implications could be beneficial given CTO's solid market position and its potential for sustainable growth.

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