Monday, 17 December 2012

Insiders buying Inland Real Estate

This shopping center REIT provides income and growth.

I think solid businesses with reliable cash flows and big dividends are still the best place to be in this market, despite the tax increases. And today I have a new recommendation for you: Inland Real Estate (IRC).

Based in Oak Brook, Ill., Inland develops, owns, operates and manages 150 commercial properties, with nearly 15 million square feet of real estate worth approximately $2 billion. It has retail shopping centers interests in Florida, Illinois, Indiana, Michigan, Minnesota, Missouri, Nebraska, Ohio, Tennessee and Wisconsin.

Its shopping centers are anchored by major grocers, drugstores and discount retailers. Typical renters are big companies like TJ Maxx, Ross Stores, SuperValu, Dick's Sporting Goods and Bed Bath & Beyond. Leased occupancy at the end of the third quarter was 93.1%.

At first blush, the financials don't look that great. Last quarter, earnings declined 36% on a 2% drop in revenue. But operating margins are 24%. And net income is likely to rise more than 10% in the year ahead. I estimate Inland will earn 87 cents a share this year and almost a dollar a share in 2013.

This real estate investment trust has a young and aggressive management team. President and CEO Mark Zalatoris is 54. Chief Financial Officer Brett Brown is 47. And Chief Investment Officer Scott Carr is 46.

The insiders have been actively buying the stock over the last several weeks. And not just CEO Zalatoris: directors Thomas McWilliams, Joel Simmon, Heidi Lawton, Joel Herter, Daniel Goodwin, Thomas McAuley, as well as officers Scott Carr and Brett Brown, have all been piling into the stock. It's a classic buying cluster, a very positive signal.

As a REIT, this trust is required by law to pay out at least 90% of its net cash flow to shareholders each year. As a result, you can look forward to a 7.2% dividend yield in addition to any capital appreciation.

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