Alpine Income Stock Down 7.8% in 3 Months: Should You Buy the Dip?

Zacks2024-12-31

The Federal Reserve’s updated interest rate projections for 2025, signaling only two quarter-point reductions next year, have particularly impacted rate-sensitive REITs, including Alpine Income ...

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PINE. The stock has declined 7.8% over the past three months, closing at $16.65 on Monday. While this performance is better than the Zacks REIT and Equity Trust - Other industry’s drop, it significantly lags behind the S&P 500 composite.REIT stocks depend significantly on debt financing and appeal to investors with high-yield dividends, making them vulnerable in an elevated interest rate environment. Concerns over rising inflation and potential policy changes under a possible Trump 2.0 administration have heightened market uncertainty, fostering a more cautious approach among REIT investors. However, the recent sell-off has led PINE to offer higher dividend yields, presenting an opportunity for investors. Its dividend now yields 6.73% after the recent sell-off. Alpine Income has inherent strength, with a high-quality net lease portfolio and a strong tenant base. PINE offers an attractive combination of high dividends and strong operational fundamentals. For investors seeking stability and upside potential in an uncertain market, PINE represents a solid opportunity. As it capitalizes on strategic growth initiatives and market recovery backed by a healthy balance sheet, shareholders are well-positioned to benefit from PINE’s long-term prospects.\nThree-Month Price Performance\nImage Source: Zacks Investment Research\nLet’s understand these factors in detail to better analyze how to play the stock after the price decline.High-Quality, Diversified Tenant Base: PINE’s portfolio comprises 133 net lease properties spread across 34 states, with a current occupancy rate of 99%. Approximately 52% of the company’s annualized base rent (ABR) comes from investment-grade tenants, a testament to its high-quality tenant roster. Major tenants include industry leaders like Lowe’s LOW, Walgreens WBA and Dick’s Sporting Goods DKS. Additionally, 83% of ABR originates from credit-rated tenants, ensuring operational transparency and financial reliability.The geographic and sector diversification of the portfolio further mitigates risks. Around 53% of ABR is derived from metropolitan statistical areas (MSAs) with populations exceeding one million, including high-growth markets like Houston, Atlanta and Tampa. This strategic focus on major markets with favorable demographic trends supports long-term revenue stability. Also, during the third quarter, PINE increased the portfolio weighted-average lease term to 8.8 years from 6.6 years at the end of the prior quarter.Opportunistic Asset Recycling and Strategic Investments: PINE’s active asset management strategy has demonstrated its ability to unlock value through accretive asset recycling. In the third quarter of 2024, the company sold eight lower-yielding properties for $48.6 million at a weighted-average cap rate of 6.8%. It then redeployed the proceeds into higher-yielding acquisitions, including four properties at an average cap rate of 8.8%. Following the quarter-end, it acquired a portfolio of five single-tenant properties in the greater Charlotte area for $28 million. This approach enhances portfolio quality while boosting cash flow.PINE is also investing in select higher-yielding loans secured by high-quality real estate. It originated a $17.8 million first mortgage construction loan secured by a Publix-anchored shopping center and three out parcels, with an initial yielding 10.25%.Financial Discipline: PINE’s financial strategy emphasizes stability and growth. The company has no debt maturities until May 2026 and minimal floating rate exposure, ensuring limited vulnerability to rising interest rates. Its leverage profile, with net debt to total enterprise value at 48%, remains moderate. The company’s $80 million liquidity, comprising cash and credit facility availability, provides flexibility for future growth opportunities.Strong Dividend Yield With Conservative Payout Ratio: PINE offers a robust annualized dividend yield of 6.2%, well above the peer average of 4.5%. Importantly, this dividend is supported by a conservative payout ratio of 67% based on 2024 estimated funds from operations (FFO). Such a low payout ratio reflects the company’s disciplined financial management, ensuring the dividend is sustainable even in less favorable economic environments.Since its IPO in 2019, PINE has consistently increased its dividend, demonstrating a commitment to returning value to shareholders. The 40% dividend growth since 2020 further underscores the company’s ability to generate and share sustainable cash flows, making it a reliable income-generating investment.\nEstimate Revisions for PINE\nThe recent estimate revision trends also mark a bullish view of analysts, with the consensus estimate for funds from operations (FFO) per share being revised upward over the past month for both 2024 and 2025.\nImage Source: Zacks Investment Research\nFind the latest EPS estimates and surprises on Zacks Earnings Calendar.\nPINE Stock Valuation Looks Attractive\nAlpine Income shares currently offer an appealing valuation opportunity. The stock is trading at a forward 12-month price-to-FFO of 9.38X, below the REIT – Other industry average of 14.85X and its one-year median of 10.12X. This discount provides an attractive entry point, with room for investors to benefit as the market potentially revalues the company’s growth and earnings potential.\nForward 12 Month Price-to-FFO (P/FFO) Ratio\nImage Source: Zacks Investment Research\nFinal Thoughts on PINE\nPINE’s discounted valuation, robust dividend yield, high-quality tenant base, active portfolio management and disciplined financial strategy collectively make it a compelling investment opportunity. The company’s ability to navigate market uncertainties while delivering consistent growth positions it as an attractive choice for income-focused and value-oriented investors. As the broader market stabilizes, PINE’s fundamentals are likely to drive significant upside potential.Analysts also share similar views, as reflected in the estimate revision trends. All these indicate that assuming an increasing position in this Zacks Rank #1 (Strong Buy) stock will be a prudent decision before the price moves significantly away from its current level. You can see the complete list of today’s Zacks #1 Rank stocks here.Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.\nWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report\nAlpine Income Property Trust, Inc. (PINE) : Free Stock Analysis Report\nLowe's Companies, Inc. (LOW) : Free Stock Analysis Report\nDICK'S Sporting Goods, Inc. (DKS) : Free Stock Analysis Report\nWalgreens Boots Alliance, Inc. (WBA) : Free Stock Analysis Report\nTo read this article on Zacks.com click here.\nZacks Investment Research","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.4","shortVersion":"4.29.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2500617182"}