Outdoor advertising services provider
Lamar Advertising Co.
) is actively pursuing plans to convert itself into a real estate
investment trust (REIT) to capitalize on a seemingly more
favorable tax environment. The company is currently mulling an
REIT election and is optimistic about receiving a favorable
ruling from the U.S. Internal Revenue Service (IRS) for the same.
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Investors looking for high dividend yields have favored the REIT
sector. Solid dividend payouts are arguably the biggest
enticement for REIT investors as the U.S. law requires REITs to
distribute 90% of their annual taxable income in the form of
dividends to shareholders. Consequently, an REIT status is likely
to reduce Lamar's tax burden and boost its cash flow as well as
augment shareholders' wealth in the form of increased dividends.
Lamar is one of the largest owners and operators of outdoor
advertising structures in the U.S. with a market-leading
inventory of over 155,000 structures. This Baton Rouge-based
company offers advertising solutions in the form of bulletins,
posters, digital billboards, buses, benches, and transit
shelters. In addition, Lamar has 22 locations that are
exclusively dedicated to the highway logo sign
Lamar has expanded its localized billboard advertising businesses
through a combination of organic growth and strategic
acquisitions. The outdoor advertising industry is growing on a
secular basis as consumers spend most of their time away from
home. Fragmentation across other advertising media and
technological advancements in the outdoor segment are aiding the
shift to outdoor advertising. In order to tap these markets,
Lamar has acquired various outdoor advertising assets to increase
the number of outdoor advertising displays in existing and new
markets. These real estate properties will serve a long way in
its quest to achieve an REIT status.
Shares of this Zacks Rank #3 (hold) stock, which is eyeing a REIT
status by Jan 2014, yielded a healthy return of 30.7% in 2013.
Despite its strong price appreciation, the stock still has solid
fundamentals that may further drive the share prices upward. The
stock is currently trading at a forward P/E of 103.7x and has
long-term earnings growth expectation of 4.0%.
Other players in the industry worth considering include
Franklin Covey Co.
), each carrying a Zacks Rank #2 (Buy).