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Readers' Mailbox: What We Think About NNN, LULU, LCC, FDO, And DLTR

 May 14, 2012 12:59 PM
 


(By Rich Bieglmeier)

Hi Rich, what's your take on NNN? I've read quite a bit of good stuff about it.

Thanks,

Ron

Ron, since you have brought NNN to our attention, we have read a lot of good stuff about it, too.

National Retail Properties, Inc. (NNN) is Real Estate Investment Trust (REIT) that focuses on single tenant net lease retail properties with $3.4 billion total assets, with 1,422 properties in 47 states across 37 industry classifications.

The company has increased dividends 22 years in a row and a 15 year average total return of 11.8% for investors, including 14.9% for the past decade. Currently, National Retail Properties yields a healthy 5.6%.

[Related -Family Dollar Stores, Inc. (FDO): More Headwinds Than Tailwinds In Near-Term]

On a last 12 months funds from operations (LTM FFO) standpoint, NNN payout ratio is 97.15%, which is normal as by law, REITs have to return 90% of their taxable income to shareholders. There is one small issue that did catch our eye, the company's year-over-expenses increased by more than 20%; however, that was more than offset by a 28% increase in rental income.

iStock sees NNN as long-term, low beta holding for investors interested in above average dividend yields. The stock is flirting with a 52-week high, so, patience might be rewarded with a little better entry point.

Ledger for Charlotte North Carolina asks about LCC, LULU, FDO, and DLTR.

[Related -Lululemon Athletica inc. (LULU): Near-Term Risks Could Further Derail Investor Confidence]

The sector chart for airlines looks ready to outperform going forward, which means US Airways Group, Inc. (LCC) should do well. Additionally, the fall in oil prices is a positive for the cost side of the business.

Fundamentally, airlines' numbers tend to be messy and weighed down by debt making, valuation look cheaper than they might actually be. US Airways is no different with a whole lot more debt than equity.

LCC has busted out on declining volume, not a combination iStock likes. Additionally, we are a little worried about the state of the economy. If GDP falls off as many are predicting, Airline stocks could suffer. If we owned the stock, we would hang on to it with trailing stops; however, we would not initiate new positions at the current level.

LCC Technical Chart - 05/14/2012

The iStock technical outlook for the clothing sector is turning bearish, which is evident in Lululemon Athletica Inc.'s (LULU) chart.


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