Monmouth’s 4Q Results Disappoint Due To Lower Dividend Income

Monmouth Real Estate Investment reported weaker-than-expected 4Q results. Its adjusted funds from operation (AFFO) of $0.19 fell 9.5% year-over-year and missed analysts’ expectations of $0.21.The company said it experienced a decline in dividend income from securities investments and an increase in preferred dividend expenses. Shares fell 1% in Monday’s after-market trading.

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Monmouth (MNR) noted that the decline “in our Dividend Income is because many REITs [real estate investment trusts] have reduced or eliminated their dividends in 2020 in response to financial pressures resulting from the COVID-19 pandemic.”

Meanwhile, Monmouth’s 4Q revenues increased by 7.5% to $42.6 million, but missed the Street consensus of $42.7 million. The company said its occupancy rate during the quarter improved by 50 basis points to 99.4% year-on-year. (See MNR stock analysis on TipRanks)

Following the earnings results, BMO Capital analyst Frank Lee raised the stock’s price target to $16 (10.7% upside potential) from $13 and reiterated a Hold rating. In a note to investors, Lee wrote, “FY20 highlighted MNR’s resilient portfolio as collections/occupancy remained near 100% throughout pandemic. FY21 is off to a good start with notable progress made on upcoming expirations while three new BTS (Built-to-Suit) properties were added, bringing total pipeline to $338m. We think additional leasing and execution on the deal front to help reduce leverage remain key catalysts for the stock.”

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 2 Buys, 1 Hold and 1 Sell. The average price target stands at $15.75 and implies upside potential of 9% to current levels. Shares are down by about 0.2% year-to-date.