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Is Lamar Advertising's 7.7% Dividend Increase Sustainable?
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Lamar Advertising Company (LAMR - Free Report) recently announced a 7.7% sequential hike in its quarterly cash dividend. The company will now pay a dividend of $1.40 per share, up from the $1.30 paid out earlier. Moreover, subject to the board of directors’ nod, Lamar expects that its quarterly distributions to stockholders in 2024 will aggregate to at least $5.40.
Based on the increased rate, the annualized yield comes at 4.6%, considering Lamar’s closing price of $122.63 on Aug. 28. The increased dividend will be paid out on Sep. 30 to stockholders of record of the company’s Class A common stock and Class B common stock on Sep. 18, 2024.
Solid dividend payouts remain the biggest attraction for REIT investors, and Lamar has been committed to the same. In the last five years, the company has raised its dividend eight times. Its five-year annualized dividend growth rate is 16.50%, which is encouraging. Such efforts raise investors’ optimism about the stock. Check Lamar Advertising’s dividend history here.
Lamar’s Business Model Supports Sustainable Dividend Payment
Lamar’s core business is performing well and generating substantial funds from operations. As a result, it is able to provide highly sustainable dividend payouts to its income investors, enhancing the appeal of its long-term thesis.
LAMR enjoys an impressive national footprint and holds a leading position as a provider of logo signs in the United States. It enjoys a diversified tenant base. Lamar also sources a significant part of its revenues from local businesses, with a diversified base of tenants. This generally leads to less volatility in revenues. In the second quarter of 2024, local and regional sales accounted for 79% of the company’s billboard revenues. Moreover, local and regional sales reported growth for the 13th consecutive quarter.
Over the recent years, Lamar has made concerted efforts to upgrade its portfolio, increasing occupancy in its existing advertising displays and enabling it to enjoy a significant market share in the U.S. outdoor advertising business. The company's increased focus on bolstering its digital capabilities augurs well for long-term growth.
Out-of-home (OOH) advertising has been growing at a rapid pace and continues to increase its market share in comparison with other forms of media, offering scope for Lamar as well as OUTFRONT Media Inc. (OUT - Free Report) . The cost of advertisement through this medium is lower than other media. In this environment, Lamar’s expansion activities over the recent years bode well for long-term growth. During the first half of 2024, the company completed multiple acquisitions for a total cash purchase price of around $28.2 million.
Lamar has enjoyed historical cash flow growth of 8.25% compared with 2.57% of the industry. As of June 30, 2024, Lamar Advertising had a total liquidity of $744.3 million. Moreover, this REIT’s trailing 12-month return on equity (ROE) highlights its growth potential. Lamar’s ROE is 42.18% compared with the industry’s average of 3.26%. This reflects that the company reinvests more efficiently compared with the industry.
Wrapping Up
Therefore, an unmatched logo signs business, a diversified tenant base across various sectors and a focus on local businesses assure stable revenues. Efforts to expand the digital platform and technological advancements in the low-cost OOH advertising platform also bode well for long-term growth. These are likely to help the company generate decent cash flows and sustain its dividend at the latest level.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Is Lamar Advertising's 7.7% Dividend Increase Sustainable?
Lamar Advertising Company (LAMR - Free Report) recently announced a 7.7% sequential hike in its quarterly cash dividend. The company will now pay a dividend of $1.40 per share, up from the $1.30 paid out earlier. Moreover, subject to the board of directors’ nod, Lamar expects that its quarterly distributions to stockholders in 2024 will aggregate to at least $5.40.
Based on the increased rate, the annualized yield comes at 4.6%, considering Lamar’s closing price of $122.63 on Aug. 28. The increased dividend will be paid out on Sep. 30 to stockholders of record of the company’s Class A common stock and Class B common stock on Sep. 18, 2024.
Solid dividend payouts remain the biggest attraction for REIT investors, and Lamar has been committed to the same. In the last five years, the company has raised its dividend eight times. Its five-year annualized dividend growth rate is 16.50%, which is encouraging. Such efforts raise investors’ optimism about the stock. Check Lamar Advertising’s dividend history here.
Lamar’s Business Model Supports Sustainable Dividend Payment
Lamar’s core business is performing well and generating substantial funds from operations. As a result, it is able to provide highly sustainable dividend payouts to its income investors, enhancing the appeal of its long-term thesis.
LAMR enjoys an impressive national footprint and holds a leading position as a provider of logo signs in the United States. It enjoys a diversified tenant base. Lamar also sources a significant part of its revenues from local businesses, with a diversified base of tenants. This generally leads to less volatility in revenues. In the second quarter of 2024, local and regional sales accounted for 79% of the company’s billboard revenues. Moreover, local and regional sales reported growth for the 13th consecutive quarter.
Over the recent years, Lamar has made concerted efforts to upgrade its portfolio, increasing occupancy in its existing advertising displays and enabling it to enjoy a significant market share in the U.S. outdoor advertising business. The company's increased focus on bolstering its digital capabilities augurs well for long-term growth.
Out-of-home (OOH) advertising has been growing at a rapid pace and continues to increase its market share in comparison with other forms of media, offering scope for Lamar as well as OUTFRONT Media Inc. (OUT - Free Report) . The cost of advertisement through this medium is lower than other media. In this environment, Lamar’s expansion activities over the recent years bode well for long-term growth. During the first half of 2024, the company completed multiple acquisitions for a total cash purchase price of around $28.2 million.
Lamar has enjoyed historical cash flow growth of 8.25% compared with 2.57% of the industry. As of June 30, 2024, Lamar Advertising had a total liquidity of $744.3 million. Moreover, this REIT’s trailing 12-month return on equity (ROE) highlights its growth potential. Lamar’s ROE is 42.18% compared with the industry’s average of 3.26%. This reflects that the company reinvests more efficiently compared with the industry.
Wrapping Up
Therefore, an unmatched logo signs business, a diversified tenant base across various sectors and a focus on local businesses assure stable revenues. Efforts to expand the digital platform and technological advancements in the low-cost OOH advertising platform also bode well for long-term growth. These are likely to help the company generate decent cash flows and sustain its dividend at the latest level.
Shares of this Zacks Rank #2 (Buy) company have risen 15.4% year to date, outperforming the industry’s growth of 6.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.