Broadstone(BNL) seekingalpha.com·2024-05-27 11:40Investment Thesis - Broadstone Net Lease (BNL) offers an attractive dividend yield of approximately 7.5% with a low AFFO payout ratio of around 80%, indicating a strong value proposition that the market has underestimated [1][43]. Business Overview - BNL operates as a diversified REIT with 759 properties across 44 states and 4 Canadian provinces, leased to 200 tenants in 53 industries, totaling a rentable area of 37.6 million square feet [4]. - The company is smaller compared to its peers in the REIT sector and has experienced poor stock performance over the last three years [3]. Key Business Metrics - BNL's occupancy rate stands at 99.2%, significantly above the REIT median, showcasing the quality of its portfolio [13]. - The weighted average lease term (WALT) is 10.6 years, indicating strong lease stability [14]. - BNL has a weighted average rent escalation of 2.0%, which is beneficial for long-term cash flow growth [16]. Financial Stance - BNL's AFFO per share has shown modest growth, with a projected increase of 0.7% year-over-year for 2024, which is considered a weak point compared to peers [23][24]. - The company has initiated a healthcare portfolio simplification strategy, focusing on more productive segments such as industrial, restaurant, and retail properties [26][29]. Liquidity and Credit Metrics - BNL maintains a strong balance sheet with a BBB- credit rating and a fixed charge coverage ratio of 4.6x, indicating solid financial health [31]. - As of March 2024, BNL has 926 million [34]. Valuation Outlook - BNL is currently trading at a P/FFO multiple of 10.2x, which is lower than its peers, suggesting potential for multiple appreciation as the company executes its portfolio reorganization strategy [36][37]. - The market has underestimated BNL's long-term cash flow generation ability, and there is a clear path to double-digit total returns through dividend growth and portfolio expansion [2][43].