CBL Stock: 3 Reasons to Consider This Top Income Stock Yielding 12.47%
Earn a Double-Digit Yield from CBL Stock
Most investors have never heard of CBL & Associates Properties, Inc. (NYSE:CBL). Its business is not particularly exciting, and the company never really made headlines. However, for investors who want to boost the yield of their income portfolios, CBL stock could be of tremendous help. Here’s why.
Headquartered in Chattanooga, Tennessee, CBL & Associates Properties is a real estate investment trust (REIT) that owns and develops malls and shopping centers. By the end of June 2017, the company’s portfolio consists of 121 properties located in 27 states, totaling 75.5-million square feet.
Income investors are no stranger to real estate stocks. Thanks to a stable business model, REITs have become a staple in many income investors’ portfolios. But what makes CBL stands out it is generous payout. Looking at the most well-known REITs today, you would be lucky to find one yielding more than seven percent. CBL, on the other hand, pays quarterly dividends of $0.265 per share, giving the stock an annual dividend yield of 12.47%.
Of course, one of the common drawbacks of investing in double-digit yielders is the lack of dividend safety. Quite often, a stock’s ultra-high yield is simply the result of investors worrying about its dividend safety.
But that’s not really the case for CBL. While the stock offers a yield that’s higher than most of its peers, the company has no problem covering its distributions.
In the second quarter of 2017, the company generated adjusted funds from operations of $0.50 per share. Considering that CBL’s weighted average cash dividend per share was $0.27281 for the quarter, the company had a dividend payout ratio of 54.6%, leaving a wide margin of safety. In the first six months of this year, this top dividend stock achieved a payout ratio of 53.5%. (Source: “Earnings Release and Supplemental Financial and Operating Information,” CBL & Associates Properties. Inc., August 3, 2017.)
Improving Business Conditions
Even with generous payouts and solid distribution coverage, this top dividend stock is far from being a hot commodity. The reason is that market participants are concerned about the future of the retail sector.
The thing is, though, while it’s true that many retailers have been struggling, the situation at CBL may not be as bad as its share price suggests. In particular, 2015 was a record year for bankruptcy closures, and the company’s portfolio occupancy dropped to 93.1% in that year, compared to 94.7% in 2014. However, due to the high demand for its properties, CBL’s portfolio occupancy quickly bounced back, rising to 94.8% in 2016. (Source: “BAML 2017 Global Real Estate Conference,” CBL & Associates Properties, Inc., last accessed September 19, 2017.)
In other words, business was actually improving for the mall and shopping center REIT.
Here’s the best part: the company is making actively redeveloping some of its properties to adapt to the changing retail marketplace. For instance, the space that was previously occupied by Sears at CBL’s CoolSprings Galleria mall in Franklin, Tennessee has been redeveloped, and now has American Girl, H&M, Belk Home, and Cheesecake Factory as its new tenants. From 2012 to 2016, the location’s sales per-square feet increased 18.3%.
Final Thoughts on This Top Dividend Stock
Since 2013, CBL has started redevelopments at 28 of its locations, with an average return of 8.6%. It may take a while for the stock market to realize the true potential of this real estate company, but the double-digit yield offered by this top dividend stock should already make it worth considering.