Agree Realty and American Assets Trust: A Comprehensive Investment Comparison

Investors are closely examining the financial prospects of two notable real estate investment trusts (REITs): Agree Realty Corporation (NYSE: ADC) and American Assets Trust (NYSE: AAT). Both companies offer distinct investment opportunities, each with its own strengths and challenges. A detailed comparison reveals insights into their valuation, ownership structure, profitability, dividends, and risk profiles.

Ownership Structures and Institutional Confidence

Institutional investors hold a significant stake in both companies. American Assets Trust boasts that 90.4% of its shares are held by these entities, while Agree Realty has an even higher institutional ownership rate of 97.8%. This strong institutional backing often serves as a positive indicator of long-term growth potential.

In terms of insider ownership, American Assets Trust has 36.8% of its shares owned by insiders, which can suggest confidence in the company’s future. Conversely, insiders own only 1.8% of Agree Realty, indicating less insider investment.

Volatility and Risk Assessment

The volatility of a stock can significantly impact an investor’s decision. American Assets Trust has a beta of 1.2, suggesting that its share price is 20% more volatile than the S&P 500. On the other hand, Agree Realty has a beta of 0.55, indicating that its share price is 45% less volatile than the benchmark index. This lower volatility may appeal to more risk-averse investors.

Dividend Dynamics

When it comes to dividends, American Assets Trust offers an annual dividend of $1.36 per share, translating to a dividend yield of 7.0%. Agree Realty, meanwhile, pays an annual dividend of $3.14 per share, yielding 4.2%. Notably, American Assets Trust has increased its dividend for four consecutive years, while Agree Realty has a single year of dividend growth.

Despite higher yields, both companies exhibit concerning payout ratios, with American Assets Trust distributing 134.7% of its earnings as dividends, and Agree Realty paying out 183.6%. These figures indicate potential sustainability issues for future dividend payments.

Earnings and Valuation Insights

In terms of financial performance, Agree Realty outperforms American Assets Trust in key metrics such as revenue and earnings per share. Despite this, American Assets Trust is currently trading at a lower price-to-earnings ratio, suggesting it may be a more affordable option for potential investors.

In a broader context of profitability, Agree Realty surpasses American Assets Trust in both net margins and returns on equity and assets, highlighting its efficiency in generating profits.

Summary of Findings

Based on the analysis, Agree Realty excels in several categories compared to American Assets Trust, winning on 11 out of 17 factors analyzed. This includes revenue generation and overall profitability, making it a strong contender for investment consideration.

American Assets Trust, headquartered in San Diego, California, has over 55 years of experience managing premier properties across the United States. Its portfolio includes approximately 4.1 million rentable square feet of office space and 3.1 million square feet of retail space.

Agree Realty, on the other hand, is redefining retail real estate by focusing on properties leased to leading omni-channel retail tenants. As of December 31, 2023, it operates a portfolio of 2,135 properties across 49 states, covering about 44.2 million square feet of gross leasable area.

Investors should weigh these factors carefully when considering investments in either Agree Realty or American Assets Trust, as each offers unique opportunities and risks in the evolving real estate landscape.