TS2B: Tech Stocks 2 Buy, Dividend-Payer Edition on Vornado Realty Trust 02.22.21

Good morning all you Cyberpunks out there and welcome to the BCB Cyber Series that takes on the Tech stocks that can provide the cyber-fuel we need to pursue our digital wealth passions.

Today we are once again tackling those big dividend payers that can add passive cash flow to our portfolios. As we dig for the cyber-fuel we need, we are always working to make sure the best of the best, those monster companies in tech, can form a key portion of our balanced portfolios.

For Dividend Payers, BCB Cyber is always looking for a forward annual dividend yield of over 3% as our key, defining characteristic. Better yet, we are looking for great tech companies we can build on overtime, delivering consistent value and technological prowess, not to mention a little cash on the side.

Today we return to a stock that’s so nice, we’re doin’ it twice: VNO. For the article that follows, new additions are added in red to update us all on the company and its stock while delivering that powerhouse intel with the basics established last time. With that, let’s take on a…

A Unique Play on Real Estate with a Technological Twist

One of the biggest names in the biggest markets of real estate, Vornado Realty Trust truly separates itself from the pack with a unique set of holdings that often emphasize bringing technology into daily life. Back in December the Yield, given the price at the time, was 5.55%, but now we find an increased yield on cost of 5.69%. So starting off we are already getting better value if we were to buy today.

While we did see a pullback in yield last year due to the world health crisis, we did see a consistent commitment to the adjusted dividend that continues today.

Vornado is a best-in-class real estate company holding incredible assets in the cyberpunk’d, corporate-dominating landscapes of New York City, Chicago & San Francisco.

In doing so, Vornado holds real estate in the most desirable, growth centric areas around the United States.

Before we dive too deep though, we strongly advocate that we don’t act solely on anyone else’s opinion, even ours! Make sure we are all thinking for ourselves as self-definers and making our own decisions. In the end, the responsibility is on each one of us as individuals. So decide wisely!

BCB Cyber: Dividend Payer Edition on VNO

Jumping right in the BCB Cyber way, we cover 3 quick pieces of important information so we can get moving on our day. First, we tackle the story to find out who and what the company is, second, we look at the numbers both positive and negative, and finally we discuss our position on the stock.

This is TS2B, Tech Stock to Buy, Dividend Payer Edition, and this week we are going to take on Vornado Realty Trust, the New York City Real Estate powerhouse is the industry leader in sustainability policy that has been on the NYSE for nearly 60 years.

1 – STORY

Owning/operating over 23 million square feet of LEED-certified buildings and receiving the Energy Star Partner of the Year Award, Sustained Excellence 2019, the story for Vornado Realty Trust (VNO), is one built on growth in the strongest urban markets in the U.S. with a commitment to sustainability and innovative technology in energy management.

Technological advancement in sustainability has led to a number of innovative features for tenants including web portal interfaces allowing for direct and more accountable management of environmental systems. The ultimate goal of being sustainable spaces.

Going the extra mile no one else goes, Vornado Building Management Services is the leader in this industry… as their site advertises, “(w)e hold more green certifications than 99% of industry peers. Our dedicated Sustainability department, with LEED AP O&M certified staff, proudly partners with leading green organizations to ensure that our BMS Green Clean℠ program exceeds industry standards.
At BMS we don’t just talk the talk.” BMS is a wholly-owned subsidiary of VNO.

Don’t just rest on these laurels though, because there are so many more…

In addition to this standard of the ultimate quality in product, VNO integrates the latest in technological art experiences as a growth driver. TheMart space in Chicago is a new defining element in the world of urban architectural stylings. Bringing the fusion of architectural art to digital art forms from renowned artists, the space is the largest permanent digital art projection in the world!

The best part of this for us lowly investors, however, is the current price of the stock. As the man said, “the time to buy is when there is blood in the streets.” Perhaps there is no better personification of this in the markets today, when embroiled in global economic standoffs and then the current global health issues, real estate in NYC bears the brunt of all these issues the last few years and it shows in their stock price.

The time is definitely now though as insiders have been buying up shares slowly and under the radar already.

Since our post in December, the company has continued to struggle under the weight of Covid-19, but it has also begun to make advances toward rectifying the situation through deferrals and tenant agreements but in some cases has also begun to pursue legal recourse and write-offs.

The news more generally has been a mixed bag. The company has stepped up to take action amidst the downturn and has begun to act for course correction.

As the closures in New York hit the retail sector hard, losses have been recognized and endured by the company however, there are several reasons for optimism including San Francisco properties that have given positive returns and possess long term leases and the newest rental agreements in 2020 to Facebook for optimal office space contracts.

As we would expect many of the correlative effects to retail given the mandatory closures, and the resultant losses, we were also not surprised to see that the company has persevered by creating new opportunities and focusing on positive outcomes.

2 – BY THE NUMBERS

Turning to the numbers now, BCB Cyber loves to follow five specific metrics: Revenue Growth, Forward Price to Earnings Ratio, Return on Assets, Operating Margin, and Debt Considerations.

We see… A solid and stable revenue profile…yes, we say this is continuing given the horrible situation VNO found themselves in this past year. While revenues were down considerably and earnings dipped accordingly, the company as we saw above is positioning itself with cash reserves to weather this storm that is not related to their business practices and will subside as does the pandemic.

A value proposition in the current Forward P/E of 34.97 (up less than a percentage point since December, while it may not seem like it compared to the broader market, within property managers it is within range of their 33.26, and compared to itself it is historically a better deal at nearly half of the previous cost; Forward P/E was over 60 in December 2019. Even more significant is the fact that since we are talking real estate in prime markets with quality dividends, Price to Book in the most recent quarter of 1.28 still represents a deep value to the value of the assets of this company when compared to itself last year as well! This does require some watchful eyes though as this metric has been declining in value.

A Solid to Strong Operating Margin, and a quality return on Assets… Given 2020 we had, where markets have been incredibly tough rents, these are incredibly encouraging results for the last twelve months.

We continue to see this resiliency despite issues. In fact, Operating Margins have increased to 16.95%, a rise of nearly 3.5% from December’s blog post. In addition, Return on Assets remains positive despite the losses.

The balance sheet also bears the need for a watchful eye as the debt ratio is a bit high… however, despite a crisis, these elements demonstrate improvement helping the case for Vornado. Our only question is timing, that is to say, how quickly can conditions recover for these actions are good but won’t last forever. Extended lockdowns will certainly have a detrimental impact on the company.

However… we do see that cash position strengthened on the cash flow statement and the small but still reduced debt load. The primary concern is dilution in the shareholder position.

We did see a balanced cash position with repayment of debts on par with past activity and a solid ending cash position once again.

In addition to our straight 5, we’ve got a few extra this week. Analysts have also demonstrated an ebb & flow feel once again for this stock but looks to be turning bullish once again. Our time for investment may be waning! UPDATE – This continues to stress patience. We have extended opportunity as while the price did push up to around $40 a share over the last couple of months, we have returned to the $37 range. Analysts too have come back on board suggesting more of a buying opportunity. This alignment continues to be in agreement with our price targets under $40, preferably under $37, and it is worth noting the $25 share price in the most recent special offering.

Finally, as a dividend payer, BCB Cyber loves to see the over 3 percent forward annual dividend yield and VNO currently has a yield of 5.69% as seen in the introduction to this post and seen here. Consistency above 3% identifies VNO as a solid passive income play but requires a watchful eye as business is still hampered by forced shutdowns.

3 – THE BCB CYBER TAKE

Where once analysts saw fair value, we still see the fair value, only the emphasis from Simply Wall Street has shifted from Dividend to the Fair Value. In other words the postioning is the saem for all intents and purposes.

As of this morning, on 02.22.21, our own portfolio has a position of 5.06%, up from 1.50% in December 2020, with an average cost of $35.78, up from $34.29. This is definitely a dividend-payer worth buying at the right price and one that BCB Cyber believes to be the right fuel for the fire!

We’ve been excited to add to our position and maintain our cost average under $37. This is a great company that has run into a transition period in its existence but is building great prospects through technology and quality clients. We’ll be keeping a watchful eye though on the metrics for this company and should the price fall, we’ll be working to maintain our 5% position in our portfolio.

Remember, we are just like the masses, struggling to make ends meet and build our future. So, we start building and keep doing our homework. This is just what we need to start us on our journey toward cyberizing our lives. Remember too, never place a market order, only go to the LIMIT! Get exactly the price we set for ourselves!

Remember, as always, think for yourself, do your own homework, and cyberize your life with the best in disruptive tech. Learn more in our Wealth Section and dive deeper into Establishing the Baseline on BCB Cyber.com!