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Whitestone REIT: 9% Dividend And Solid Earnings

Summary

This updates an article that I wrote about Whitestone REIT last Spring, which noted its attractiveness to income investors.

Since then, the REIT sector has sold off, but the now-9% dividend remains intact, and the company has made good progress in improving some of its fundamentals.

Whitestone remains attractive at these lower price levels for income investors, who can enjoy the reliable dividend while waiting for investor sentiment to shift back in favor of REITs.

Background

This updates an article I wrote earlier this year on Whitestone REIT (NYSE:WSR), an internally managed, $340 million small cap REIT. It currently has a portfolio of 70 mall shopping malls (which it terms "Community Centered PropertiesTM") in Texas, Arizona and Illinois. No single Whitestone tenant comprises more than about 2.2% of its annual rental income stream. Best of all, Whitestone pays an appetizing 9% dividend, and it pays it monthly, too, which many investors prefer.

In my previous article, I wrote, "If you are looking for a good source of monthly income, Whitestone may be the stock for you." With the company having just released its third quarter 2015 earnings report, let's see if that still holds true.

Whitestone Financials

I like to start with a company's financials, because they will cut through the mustard of management's schemes and dreams and show the strength of the life force flowing through its veins.

First, a brief refresher on the company's general financial posture. The annual data shows that Whitestone has grown by leaps and bounds over the past five years, though with the occasional hiccup here and there. We are not dealing with some static dividend payer, but with a company on a mission.

Whitestone Annual Financial Data

2010196,44531,5331,57584,283100,941
2011273,49334,9151,333130,707127,890
2012385,37144,99453172,887190,608
2013507,97460,4923,919220,915264,277
2014634,29772,3827,746213,323394,000

Sources: Whitestone 10-Ks, 26 February 2015 press release and 27 February 2015 conference call. All amounts in $000. The amount of 2014 debt was stated during the conference call.

Assets increased during the first nine months of the year from $634.3 million to $783.6 million, or 24%. Thus, the company continued in 2015 to grow at a rapid pace.

Next, let's review the company's annual cash flow. This is the information that many investors are most interested in because it tells you how sustainable the dividend will be.

Whitestone Annual Cash Flows

Sources: Whitestone 10-Ks and 26 February 2015 press release. All amounts in $ except ratio, which is Dividends per share divided by FFO/share. Net Income is that attributable to common shareholders.

At a glance, we can see that Whitestone hasn't raised its dividend in the last five years (and, to get ahead of ourselves a bit, it hasn't raised it in 2015, either). Meanwhile, the FFO did not cover the dividend in the 2011-2014 timeframe, and that's not something that you generally want to see. Whenever I see that and I otherwise like a REIT, I look at the very least for improvement in the coverage ratio so that there is at least the hope that the dividend will be covered soon. Basically, I want to see if there is any way to approach the data that makes the stock worth owning.

Now that we have a sense of the company's character and patterns, let's zero in cash flows for the first nine months of 2015 and compare them to the same period in 2014. I prefer to...


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