As that chart shows, the retail REIT has significantly underperformed the S&P 500 over the last five years, producing a negative total return in that timeframe.
The pandemic has played a role in Acadia's underperformance. As noted, many of the REIT's tenants struggled to pay their rent due to government-mandated restrictions on nonessential businesses and stay-at-home orders. While the company worked with tenants during this challenging time, several retailers went out of business, causing the company to write off their rent.
However, Acadia's troubles started long before the pandemic. Consumers have steadily shifted their spending habits from shopping at retail stores to make more purchases online. That headwind has hurt retailers, causing several to close up shop and declare bankruptcy, with others shrinking their store footprints. Because of that, the company's FFO per share declined in the years preceding the pandemic. For example, from 2015 through 2019, Acadia's FFO went from $1.53 per share to $1.41 per share.
Also weighing on FFO was a steady stream of portfolio tweaks. It bought and sold several retail properties over the years in both its core and fund portfolios as it adjusted to the changing retail landscape.
Despite the headwinds impacting FFO, Acadia had done a solid job growing its dividend until the pandemic hit. It had routinely increased its payout, which it supplemented by paying periodic special dividends.
However, the company suspended its dividend in early 2020 to preserve cash. It reinstituted a payout about a year later, though at a nearly 50% lower rate than the previous level. Even at that lower rate, Acadia offered a fairly competitive dividend yield of around 2.8% in mid-2021. That's due in part to the decline in its stock price in the past year. Acadia's dividend yield was only slightly less than the REIT sector average in the low-3% range.
The bottom line on Acadia Realty Trust
Retail REITs like Acadia Realty Trust are facing increasing headwinds. The retail industry was already under pressure before the pandemic due to shifting consumer purchase habits to online retailers. Unfortunately that trend accelerated during the pandemic, which could put additional pressure on Acadia's tenants.
However, on a more positive note, there's a lot of pent-up demand for experiences outside the home, including shopping. Because of that, retailers could get a shot in the arm in 2021 as consumers get out and spend their stimulus checks. That could help get the sector back on its feet, boosting the fortunes of retail REITs like Acadia.