With the dividend cut in half for 2019, we are cutting our price target in half to $1.
Shares of CBL & Associates Properties Inc. fell to a new low on Wednesday amid plans to suspend its dividend for two quarters this year after a proposed settlement to a class action suit.
While the stock price dropped nearly 25 percent to close at $1.44, shares in the Chattanooga-based shopping center owner and operator may not have reached a bottom, according to analysts.
San Francisco-based global financial services firm BTIG on Wednesday cut its price target for CBL to $1 per share.
"We had previously established our $2 price target on an assumed 30-cent annual dividend rate and a warranted yield of 15 percent. With the dividend cut in half for 2019, we are cutting our price target in half to $1," said analysts James Sullivan and Ami Probandt in a research note.
Over the past year, the company's market value is off about 67 percent, or $527 million. The current value is only a fraction of the market capitalization six years ago before a rash of retail bankruptcies when CBL shares were selling in the mid-$20 per share range.
CBL, which holds 67 malls nationwide including Hamilton Place and Northgate malls in Chattanooga, said Tuesday it would suspend payment of its dividend and set aside $90 million in connection with the proposed settlement.
The suit, filed three years ago in Florida, claimed CBL and affiliated entities overcharged tenants at bulk metered malls for electricity.
CBL has denied the allegations of wrongdoing and continued to do so even with the announcement of the settlement.
"We deny all allegations of wrongdoing and conduct our business with the utmost integrity," the company said in a statement. "However, given the class certification, denial of our petition to appeal, an accelerated trial schedule, and the potential cost of an adverse outcome or prolonged litigation, we believe that the proposed settlement is in the best interest of the company and its shareholders."
A trial date had been set for April 2 in Fort Myers, Florida, in federal court.
Jim Campbell, managing partner of Campbell Rooks Wealth Management in Chattanooga, wondered if there won't be some sort of financial reorganization, such as the founding Lebovitz family taking the publicly held company private.
"They need the ability to invest in the future," he said, citing CBL's plans to redevelop its malls into town centers. "That takes capital. This company needs capital in the future to do so."
The Motley Fool noted that given CBL's exposure to store closings, one of the few compelling reasons to hold the stock was its dividend. While CBL said it anticipates resuming a quarterly distribution with its dividend payable in January 2020, that's a long time given the retail landscape, according to Lou Whiteman of The Motley Fool.
The suspension of the dividend for two quarters will preserve about $26 million in cash at the current quarterly dividend rate, according to CBL. Based on the current projection of taxable income for 2019, which includes the impact of the settlement, the real estate investment trust believes it will satisfy all required distributions for the 2019 taxable year.
CBL anticipates accruing in its financial statements for the first quarter of 2019 a reserve related to the settlement of about $88.1 million. CBL said insurance does not cover the proposed settlement amounts.
Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318. Follow him on Twitter @MikePareTFP.