Easterly Government Properties (DEA – Research Report), the Real Estate sector company, was revisited by a Wall Street analyst yesterday. Analyst Merrill Ross from Compass Point maintained a Hold rating on the stock and has a $9.50 price target.
Merrill Ross has given his Hold rating due to a combination of factors affecting Easterly Government Properties. The company’s decision to cut its dividend by 32% after maintaining it for over two years has led to a negative impact on the stock, damaging management’s credibility. This dividend reduction, coupled with a reverse stock split, has created near-term pressure on the stock price.
Additionally, the company’s strategy of overpaying dividends in the past created a misleading narrative about its earnings potential, leading to an erosion in net asset value. Although Easterly Government Properties has a strong tenant base with government agencies, the prolonged time to replace noncore assets with growth-oriented ones has further affected valuation. The new dividend policy, while more sustainable, suggests that significant growth in dividends will only occur with meaningful acquisitions, which are currently not anticipated in the near term due to market volatility and funding constraints.
Based on the recent corporate insider activity of 6 insiders, corporate insider sentiment is positive on the stock. This means that over the past quarter there has been an increase of insiders buying their shares of DEA in relation to earlier this year.