Gas station and convenience store real estate investment trust Getty Realty (GTY) did it again. The REIT posted third quarter earnings last Wednesday, showing it exceeded funds from operations estimates by a penny, beating the consensus for the second consecutive quarter. Revenue of $36.4 million was also about $3.8 million ahead of estimates.
More importantly, the trust increased the dividend by 5.7% to 37 cents per share per quarter, equating to a 4.5% indicated dividend yield. That new dividend was at the low end of the range of 37 cents to 39 cents I had projected back in April, but still represents solid progress for a company that appeared to be in some hot water back in 2011, when its largest tenant missed a lease payment and filed for bankruptcy, and ultimately repossessed the 788 affected properties. There was fallout however: GTY cut the dividend, eliminated it for one quarter, and then resumed it at about a quarter where it was when the trouble started.
Since June 2012, however, GTY has increased the dividend to 37 cents from 12.5 cents, which represents a 15.5% compound annual growth rate. While still not back to the pre-crisis level of 48 cents per quarter, the increase still represents a nice comeback.
GTY currently owns 936 properties in 33 states, which it leases to operators. The trust is unlikely to repeat the 2011 mess -- in which the one tenant that leased most of the trust's properties went bankrupt. Getty now has a well-diversified tenant base, with none accounting for more than 16% of annualized base rent. In addition, nearly three-quarters of the properties have a convenience store on the premises, and 10% have quick service restaurants, including Wendy's (WEN) , McDonald's (MCD) or a Dunkin' Brands (DNKN) store.
GTY has acquired 415 properties over the past decade, and is still in growth mode. Last year, the company acquired 41 properties for $78 million, after a big year in 2017, in which it snapped up 103 properties for $214 million. Through the third quarter of 2019, GTY has picked up 14 properties for $43 million, while expanding into Alabama, Kentucky and Minnesota.
While REITs might appear a boring business, this one has proven profitable. Getty Realty is business to buy and put away, and let the magic of compounding through dividend reinvestment do its job.