You Can Buy This REIT Below What Company Insiders Paid

Insiders may sell stocks because they need cash to buy a home, pay expensive college tuition or for any number of reasons. But buying shares indicates a belief in the value of the company and is generally seen as a positive for the stock. It's even more significant when multiple insiders buy shares of company stock, as that indicates optimism across the company.

Investors hate to see their stocks lose value during market pullbacks, but one of the advantages of a pullback is the ability to pick up new shares of stock at lower prices and with higher dividend yields.

Take a look at one popular real estate investment trust (REIT) that has had large insider purchases even as overall REIT share prices have declined. Investors can now take advantage of present market conditions to buy this REIT at prices below what insiders have recently paid.

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Agree Realty Corp. ADC is a Bloomfield Hills, Michigan-based net-lease REIT that focuses on retail properties. Its portfolio includes 2,004 properties totaling 42 million square feet in 49 states. Sixty-eight percent of its tenants are investment grade.

Agree Realty was founded as Agree Development Co. in 1971. It went public as a REIT on the New York Stock Exchange in 1994 as Agree Realty Corp. Some of its largest tenants include well-known names like Walmart Inc. WMT, Best Buy Co. Inc. BBY Dollar General Corp. DG and Kroger Co. KR.

After a significant price decline, Agree Realty has seen massive amounts of insider buying over the past two months. On Sept. 21, director John Rakolta Jr. purchased 30,000 shares of Agree Realty at an average price of $57.48 for a total of $1.7 million. Rakolta now has control over a total of 360,056 shares of the company, with 360,056 shares held directly.

Insiders were also heavy purchasers of shares in early August. President and CEO Joey Agree bought 10,000 shares of Agree Realty stock at an average price of $62.79, for a total cost of $627,900. Joey Agree now owns 539,253 shares of Agree Realty stock.

Rakolta also purchased 30,000 shares of Agree Realty stock at a weighted average price of $63.02. The total cost of this purchase was $1.9 million.

Richard Agree, a director and executive chairman of the board, purchased 11,750 shares of company stock at an average cost of $62.95, for a total of $739,739. The next day, Richard Agree added to his total with another purchase of 18,250 shares at an average price of $63.70 for a total of $1.2 million. Following these purchases, Richard Agree owned a total of 533,290 shares, although some of those are held indirectly by other family members.

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Over the past year, when Agree Realty shares traded between $62 to $63, it found strong market support, leading to subsequent increases in share prices. However, that was not the case most recently and Agree Realty has now fallen through previous support levels. Its most recent closing price was $56.94, slightly below the latest corporate member's buy and about 10% under the August purchases made by company insiders.

While insiders don't always buy company stock at the absolute bottom, they usually have a better idea than others when share prices are below true value. These purchases are also significant because over the past two months, there have been very few instances of insider purchases among REITs.

Agree Realty didn't impress the Street very much with its second-quarter earnings report, but the numbers were still improving year over year. On Aug. 1, Agree Realty reported Adjusted funds from operations (AFFO) of $0.98, in line with analyst estimates and a penny above the second quarter of 2022. Revenue of $129.9 million missed the estimates of $130.64 million but was 23.9% higher than revenue of $104.88 million in the second quarter of 2022.

In recent news, on Sept. 18, Agree Realty promoted Nicole Witteveen to chief operating officer and announced the addition of Edward Eickhoff as executive vice president of asset management.

Analysts are mildly bullish on Agree Realty. Last week Citigroup analyst Michael Bilerman maintained a neutral rating on Agree and lowered his target price from $75 to $64. Wells Fargo analyst Connor Siversky initiated coverage on Agree Realty with an Overweight rating and announced a price target of $70.

Like many other REITs, Agree Realty has struggled this year with higher interest rates and has a total year-to-date return of negative 16.58%. But if an investor can buy shares for less than company officials, that would seem to be a positive for the long term.

Agree Realty Corp. pays a monthly dividend of $0.243, with an annual $2.916 dividend that presently yields 5.12%. It has an ex-dividend coming up on Sept. 28 for those who want to receive the next dividend payment.

For a chance at significantly higher yields, you can browse Benzinga's selection of handpicked investment opportunities from established real estate investment platforms. Click here to check them out. 

Weekly REIT Report: REITs are one of the most misunderstood investment options, making it difficult for investors to spot incredible opportunities until it's too late. Benzinga's in-house real estate research team has been working hard to identify the greatest opportunities in today's market, which you can gain access to for free by signing up for the Weekly REIT Report.

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