It looks like the market will be in a funk for a while and, for a fully invested index such as 2 for 1, that would typically translate into a good time to buy and a bad time to sell, notes Neil Macneale, editor of 2-for-1 Stock Split Newsletter.
For the 2 for 1 Index, over the last 25 years, stocks added during these periods of correction have tended to do very well and, interestingly, stocks deleted during these times have not done as poorly as one might expect.
The "Stock Split Advantage" means that the companies in the 2-for-1 Index, overall and for two to three years, have an inherent advantage over the market and, seemingly, are somewhat inoculated against the worst impacts of any bear market corrections.
For our next potential winner, CTO Realty Growth, Inc. (CTO) will be added to the Index. CTO will be splitting its stock 3 for 1 at the end of June. CTO is a small ($373M market cap) real estate investment trust (a REIT), a sector that has rarely been well represented in the 2 for 1 Index.
CTO owns 2.7M square feet of commercial property, primarily in Florida and Texas. CTO is selling at below book value, has a reasonable debt level for a REIT, and is less volatile than the market average. CTO has been growing its earnings at a 14.5% annual rate for the last five years.
Along with these good numbers, comes the fact that, as a REIT, it is required by the IRS to pay out 90% of its net earnings to its shareholders, resulting in almost a 7% annual dividend. Insiders own a decent percentage of the stock and there has been insider buying activity recently.
There is risk here, due to the relatively small size of this company, but management seems to have a good record of picking a diverse, well located, and profitable group of properties. It's my hope a 3 for 1 split announcement is an indicator of management's continued confidence going forward.