Tanger Suspends Dividend as Mall Challenges Come to a Head
Tanger (SKT) reported earnings today and suspended its quarterly dividend. The owner of outlet malls will pay the previously-scheduled dividend on May 15, but payouts will cease after that until further notice.
By suspending the dividend, Tanger will save $35 million in cash per quarter to help preserve the firm's balance sheet and maintain financial flexibility.
It's unclear when the dividend will be reinstated (and at what level). By law REITs must pay out 90% of their taxable income to shareholders, but it's too early say what profit Tanger will earn in the foreseeable future.
On March 24, we downgraded Tanger's Dividend Safety Score to Very Unsafe as government-mandated shutdowns of non-essential stores looked to be the nail in the coffin for some of Tanger's tenants and the dividend.
Back in May 2019, we downgraded Tanger to Borderline Safe as tenant struggles put pressure on occupancy levels, rent rates, and, ultimately, cash flow.
Given Tanger's challenges coming into the pandemic, the worst may still be ahead for the firm. As of today, only 12% of tenants are open for business, and just 12% of rent was collected in April (all tenants were offered rent deferrals).
Tanger's valuation is obviously not demanding today, but our preference would be to move on in a case like this one. Cheap stocks with high debt loads and questionable futures often find ways to become even cheaper.
By suspending the dividend, Tanger will save $35 million in cash per quarter to help preserve the firm's balance sheet and maintain financial flexibility.
It's unclear when the dividend will be reinstated (and at what level). By law REITs must pay out 90% of their taxable income to shareholders, but it's too early say what profit Tanger will earn in the foreseeable future.
On March 24, we downgraded Tanger's Dividend Safety Score to Very Unsafe as government-mandated shutdowns of non-essential stores looked to be the nail in the coffin for some of Tanger's tenants and the dividend.
Back in May 2019, we downgraded Tanger to Borderline Safe as tenant struggles put pressure on occupancy levels, rent rates, and, ultimately, cash flow.
Given Tanger's challenges coming into the pandemic, the worst may still be ahead for the firm. As of today, only 12% of tenants are open for business, and just 12% of rent was collected in April (all tenants were offered rent deferrals).
Tanger's valuation is obviously not demanding today, but our preference would be to move on in a case like this one. Cheap stocks with high debt loads and questionable futures often find ways to become even cheaper.
