In this article, we want to shed light on a new Preferred Stock issued by Kimco Realty Corp (NYSE: KIM).

Our goal is purely to inform you about the product while refraining ourselves from an investment recommendation. Even though the product may not be of interest to us and our financial objectives, it definitely is worth taking a look at.

The New Issue

Before we submerge into our brief analysis, here is a link to the 424B5 Filing by Kimco Realty Corp – the prospectus.
Source: SEC.gov

For a total of 9.2M shares issued, the total gross proceeds to the company are $230M. You can find some relevant information about the new preferred stock in the table below:

Source: Author’s spreadsheet

Kimco Realty Corp 5.25% Class M Cumulative Redeemable Preferred Stock (NYSE: KIM-M) pays a fixed dividend at a rate of 5.25%. The new preferred stock has a ‘BBB-‘ Standard & Poor’s rating and is callable as of 12/20/2022. Currently, KIM-M trades a little below its par value at a price of $24.70 and has a Current Yield of 5.31% and YTC of 5.74%. The dividends paid by this preferred stock are not eligible for the preferential 15-20% tax rate on dividends. They are also not eligible for the dividend received deduction for corporate holders. This means that the “qualified equivalent” Current Yield and YTC would be 4.43% and 4.78%, respectively.

Here is how the stock’s YTC curve looks like right now:

Source: Author’s spreadsheet

The Company

Kimco Realty Corp. (NYSE: KIM) is a real estate investment trust (REIT) headquartered in New Hyde Park, N.Y., that is one of North America’s largest publicly traded owners and operators of open-air shopping centers. As of September 30, 2017, the company owned interests in 507 U.S. shopping centers comprising 84 million square feet of leasable space primarily concentrated in the top major metropolitan markets.

Source: The company’s website – Corporate Profile

Below, you can see a price chart of the common stock, KIM:

Source: Tradingview.com

The yearly dividend paid by KIM has increased for the last 8 years from $0.66 in 2010 to $1.035 in 2016, which is a 57% increase. Also, the expected yearly dividend of the common stock for 2017 is $1.09. With a market price of $18.24, the current yield of KIM is 5.97%. As an absolute value, this means it has a $463.96M yearly dividend for 2017. The yearly dividend payments of the company’s outstanding preferred stocks (including the newly issued Series M), for comparison, is around $56.33M.

In addition, with a market capitalization of around $7.75B, KIM is one of the biggest retail REITs.

Capital Structure

Below you can see a snapshot of Kimco Realty Corp’s capital structure as of its last Quarterly Report in September. You can also see how the capital structure evolved historically.

Source: Morningstar.com – Company’s Bonds

As of Q3 2017, KIM had a total debt of $5.6B ranking senior to the newly issued preferred stock. The new Series M preferred shares rank junior to all outstanding debt and equal to the other outstanding preferred stocks, which total $800M.

Kimco Family

Source: Author’s database

The company has 4 more outstanding preferred stocks:

Kimco Realty Corp 6.00% Depositary Shares Class I Cumulative Redeemable Preferred Stock (NYSE: KIM-I) Kimco Realty Corp 5.625% Depositary Shares Class K Cumulative Redeemable Preferred Stock (NYSE: KIM-K) Kimco Realty Corp 5.50% Depositary Shares Class J Cumulative Redeemable Preferred Stock (NYSE: KIM-J) Kimco Realty Corp 5.125% Depositary Shares Class L Cumulative Redeemable Preferred Stock (NYSE: KIM-L)

Source: Author’s database

If we compare the newly issued Class M preferred stock with the rest of KIM’s preferred stocks, we can see that it has a slightly better Yield-to-Worst than the previously issued Class L preferred stock, KIM-L. KIM-M has Current Yield and YTC of 5.31% and 5.74% respectively, compared to 5.16% and 5.64% for KIM-L. Still, a spread of 0.15% is too insignificant to favorite KIM-M, so from an investment standpoint – in case that you like the company – there is little difference as to which one you will choose.

Furthermore, there are 12 Corporate Bonds issued by the company:

Source: FINRA.org

The 2022 Corporate Bond has almost the same maturity date as the call date of KIM-M and has a Yield-to-Maturity of 2.943%. This should be compared to the 5.74% Yield-to-Call of KIM-M, but when making that comparison, do remember that KIM-M’s YTC is the maximum you could realize if you hold the preferred stock until 2022. Still, there is a yield spread of almost 3% between the two securities.

Some more information about the bond could be found in the table below.

Source: FINRA.org – KIM4298401

Sector Comparison

The chart below contains all preferred stocks in the ‘REIT – Retail’ sector (according to Finviz.com) that pay a fixed dividend. It is important to take note that none of these preferred stocks are eligible for the 15% federal tax rate. The preferred stocks issued by CBL are excluded, as this company is in turmoil currently.

Source: Author’s database

The investment grade only:

Source: Author’s database

All REIT’s Preferred Stocks

Below you can see a chart with all REIT preferred stocks with a par value of $25 that pay a fixed dividend rate, excluding the preferred stocks issued by RAS and CBL.

Source: Author’s database

Again, the investment grade only:

Source: Author’s database

The next chart adds one more condition – to have a positive Yield-to-Call.

Source: Author’s database

All ‘BBB-‘ Preferred Stocks

The last chart contains all preferred stocks that pay a fixed dividend rate, have a par value of $25, a ‘BBB-‘ Standard&Poor’s rating and positive Yield-to-Call.

Source: Author’s database

For a better view SCE-D, SCE-B, SCE-C, and SCE-E are excluded from this chart, as their Yield-to-Call is 147%, 69%, 41%, and 22%, respectively. It is also important to note that except KIM’s preferred stocks, VNO-L, VNO-M, and NNN-F – they all pay a qualified dividend rate. Furthermore, except these REIT’s preferred stocks and the EIX’s preferred stocks, they are all non-cumulative.

Special Considerations

Nothing out of the ordinary.

Use of Proceeds

We intend to use the net proceeds of this offering for general corporate purposes, including, without limitation, any one or more of the following: (NYSE:I) the funding of development and redevelopment costs; (II) the potential redemption of other classes of our preferred stock with an aggregate liquidation preference of $575 million which are currently callable at our option; and (NASDAQ:III) the reduction, from time to time, of our outstanding indebtedness, including borrowings under our revolving credit facility maturing in March 2021 (subject to two six-month extension options), which borrowings bear interest at a rate of one-month LIBOR plus 0.875% (2.10% as of September 30, 2017).

Source: 424B5 Filing by Kimco Realty Corp

Addition to the S&P preferred stock index

With the current market capitalization of the new issue of around $228M, it is a potential addition to the S&P US Preferred Stock iShares Index (NASDAQ: PFF). If the average monthly volume of KIM-M after its first six months trading on the NYSE is more than 250,000, it would be eligible to be included in the S&P U.S. Preferred Stock Index. With fewer than six months of trading history, issues are evaluated over the available period and may be included if available trading history infers the issue will satisfy this requirement.

Conclusion

This is an informational article about the new preferred stock KIM-M. With this kind of articles, we want to keep you in touch with all new preferred stock and baby bonds IPOs.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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