Last week, Lexington Realty (NYSE:LXP) released the company’s first quarter earnings results and Mr. Market seemed to yawn – shares down .6%.
As a follow up to an article that I wrote a few weeks ago, I am providing a recap of LXP’s latest earnings results in hopes of determining whether or not Mr. Market is ignoring this REIT or if he sees something that I don’t.
As I explained in the recent LXP article, “I can say with a fair degree of confidence that Lexington Realty is a mis-priced REIT that deserves a better score.” Even after the first quarter earnings were released (last week), LXP is still behaving as if there is invisible risk – that oftentimes is the primary reason for investor losses.
Like many dividend investors, I jumped on LXP’s gravy train to take advantage of the outsized dividend yield – now an eye-popping 7.5% yield (the second highest in the peer group).
Sometimes though, a robust yield like this can be too good to be true. That’s what I refer to as a “sucker yield” and as I wrote in Investopedia:
A “sucker-yield” is based on quantifiable high yields, seemingly ridiculous, when the underlying security has a flawed or vulnerable business model. Companies that fall under the “sucker-yield” definition typically have unpredictable and unreliable earnings histories with unsafe dividend payouts.
Many – including me – can get distracted by the glare of gold “seemingly hypnotized by the allure of owning securities with substantial income.” As a true measure of safety, it’s critical that investors analyze the underlying safety of the dividend, the ability for the dividend to grow, and the overall merit of the stock. Let’s begin…
The Latest Results
In the first quarter, LXP’s Funds From Operations (or FFO) was $0.26 per share. As I referenced (in my last article), I was “expecting to see mediocre results with accelerated progress” in Q2, Q3, and Q4.
