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Subject:  Re: Brad Thomas is really bullish on SKT Date:  2/25/2019  5:08 PM
Author:  BruceCM Number:  84518 of 84940

I have no interest in who thinks this or that about some stock....my interest is in how well the company can grow its cash flows.

I just updated SKT's CFs for 4Q18, and they do indeed appear strong. Using rolling 4Q periods, for 3Q18 ==> 4Q18

Revenue/share 1.317 ==> 1.323, a very modest increase
Net CFFO/Share .638 ==> .672, where Net CFFO = CFFO - preferred div - Dist to Non-Controlling Interests
Interest Expense as % of [CFFO + Interest]: 20.2% ==> 20.1% Again, modest improvement, but this ratio has been virtually unchanged over past 20Q
Dividend-to-Net CFFO payout ratio: 54.6% ==> 52.2%, another modest improvement and very favorable for a retail REIT
Percent of CFFI paid with Net CFFO AFTER dividends: 166% ==> 300% This is VERY unusual for a REIT, who, due to the requirement they distribute most of their cash, rarely have enough cash left to pay for all their investing activities. Most REITs I follow, if they are in the 30% - 50% range, they're great performers. This means there is cash left for financing activities...
Paid-Down Debt for 4Q18: 124.8MM

SKT has another unusual financial character: the past 5 Cash Flows from Financing Activities, or CFFA, after adding back common and preferred dividends, have been ($MM) -8, -4, -16, -21, -36. This represents the amount of financing capital that has been repaid or bought down (a negative number on the Statement of Cash Flows means a net payout from the company). Again, this is VERY unusual for a REIT. Even the better REITs I track show CFFA, with dividends added back, a usually a positive value with an occasional negative value.

You just don't see many REITs this strong with this kind of consistently positive trending cash flows. Now, does SKT face headwinds in the Retail arena...I'm sure they do. And some of their CF metric growth is indeed slowing. Indeed, SKT has had periods of slowing CFs and corresponding slow dividend growth. Annual dividend growth was <1% 2000-2003 and 2009-2011. SKT finished 2018 with a 2.9% dividend growth rate, the lowest since 2011 when it was 2.6%. It would seem evident that SKT management is conservative in their cash management.

This is probably one of the better 6.6% yielding stocks around.

Just one view

BruceM
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