One way to see whether company management is “putting their money where their mouth is,” so to speak, is by tracking insider buying activity. Insider buying refers to the purchase of company shares by executives, board members, and shareholders of 10% or more - a group that's generally considered to have fairly intimate knowledge of corporate operations, finances, and strategic plans. Given that, insider buying by these well-placed investors is often viewed as a bullish sign that they believe the share price will rise.
With that in mind, here's a closer look at one high-yield dividend stock in the Real Estate Investment Trust (REIT) space that has been the target of heavy insider buying by both its Chairman and CEO over the past month - even as JPMorgan Chase (JPM) CEO Jamie Dimon has sounded the warning bell on commercial real estate.
About Agree Realty Stock
Founded in 1971 by Richard Agree - who serves as the company's current chairman - Agree Realty Corp (ADC) owns, develops, acquires, and manages retail properties. Its core focus is on net-leased properties with several national and regional retail companies across various sectors represented in its portfolio. ADC's market cap currently stands at $5.7 billion.
ADC stock is down 9.4% on a YTD basis to lag the broader equities market.
As with most REITs, ADC offers a generous dividend. The company pays a monthly dividend of $0.25, and yields 5.19% at current levels.
Heavy Insider Buying on ADC Stock
On Feb. 29, Chairman Richard Agree purchased 16,000 shares of the company at an average price of $55.50 per share for a total value of $888,000, taking his stake to 0.6345%. This wasn't the chairman's only purchase of ADC in 2024; on Jan. 10, Agree bought 10,500 shares at an average price of $62.57 per share, totaling about $657,000. Year-to-date, that's over $1.5 million of insider buying for Chairman Agree.
Moreover, his son and company CEO Joey Agree also loaded up on ADC shares in February. He made two transactions last month, buying a total of 5,500 shares for a value of about $314,340 in total.
However, board member John Rakolta Jr. was the insider with the deepest pockets last month. In two transactions, Rakolta bought 40,532 shares of the company for about $2.3 million.
Inside ADC's Earnings
Although the company's Q4 EPS of $0.44 failed to surpass the consensus estimate of $0.45, the appropriate metric to measure profitability for REITs is funds from operations (FFO). Agree reported FFO of $1.00 per share on an adjusted basis, which edged past the consensus estimate.
Moreover, the company's revenues rose by 23.7% from the prior year to a stronger-than-forecast $144.2 million. Retail giants like Walmart (WMT), Dollar General (DG), Best Buy (BBY), and CVS Health (CVS) continued to remain among its top 5 tenants.
ADC closed the December quarter with a land value of $2.3 billion (up 17.6% YoY) and the value of owned buildings at $4.9 billion (up 20% YoY), with over $1 billion of total available liquidity.
Analysts are forecasting bottom-line growth of 3.29% to $4.08 this fiscal year, with revenue anticipated to rise 13.49%.
Inside ADC's Real Estate Portfolio
Despite lingering concerns over commercial real estate, Agree Realty has an impressive stable of tenants in its properties. Along with Walmart and the other aforementioned retail giants, Agree Realty's total portfolio consists primarily of national brands (88%), with the rest comprised of super-regional brands (11%) and franchises (1%). While companies in the national segment include behemoths like McDonald's (MCD), Costco (COST), and Amazon (AMZN), franchises include giants like Wendy's (WEN) and Taco Bell. Notably, many of these companies have a robust brand value and are considered recession-resistant due to the immense popularity of their products and services, giving them strong pricing power - and making them a source of reliable income for Agree Realty.
Notably, the quality of the tenants is also highlighted by the fact that the company's portfolio consists of 69% investment-grade tenants and 16% sub-investment-grade tenants, with only 15% being unrated.
What Do Analysts Expect for ADC Stock?
Overall, analysts remain firmly optimistic about Agree Realty stock, which has a rating of “Strong Buy” and a mean target price of $67.10. This denotes an upside potential of about 17.8% from current levels. Out of 15 analysts covering the stock, 10 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating and 3 have a “Hold” rating.
