Those billboards that line highways and perch on city buildings across the land advertise myriad companies and organizations but often also carry the same small sign: "LAMAR" in white lettering on a black background in a rectangle permanently mounted below the changing messages themselves.
There's a reason they're so familiar to so many. Lamar Advertising (NASDAQ: LAMR) says it has more than 357,000 displays across the United States and Canada, making it one of the largest outdoor advertising companies in the business.
And, since 2014, it's been a real estate investment trust (REIT).
Lamar Advertising company profile
Lamar Advertising's history follows the trajectory of outdoor advertising itself. The company was founded in 1902 by J.M. Coe to advertise the offerings at his Pensacola Opera House in that Florida Panhandle city. Charles Lamar became a partner, and then in 1908 the businessmen decided to split up and flipped a coin to see who got what. The rest is history.
Lamar got the less-lucrative half of the business and renamed it Lamar Outdoor Advertising Company. Led by Lamar and his descendants, the company grew its Gulf Coast business and 20 years later moved its headquarters to Baton Rouge, Louisiana, where it remains today.
Lamar has grown with the "out-of-home" advertising industry, organically and through decades of acquisitions as it helped local, regional, and national brands reach broad audiences through traditional billboards, transit and airport advertising, and a thriving interstate logo business.
The company currently boasts what it calls the largest network of digital billboards in the country, with more than 3,600 displays. Lamar is now using that network to help warn as well as merchandise to the public, through an agreement it announced on Dec. 8, 2020, to transmit emergency messages for the Federal Emergency Management Agency (FEMA).
How Lamar Advertising makes its living
Lamar makes its living from three different types of outdoor advertising displays: billboards, logo signs, and transit advertising displays. In its 2019 annual report, the company said it owned and operated approximately 157,800 billboard displays in 45 U.S. states and Canada.
Lamar either owns or leases the real estate on which they stand and owns the structures themselves. The company divides those between "bulletins" -- the large billboards that target vehicular traffic on major highways -- and "posters" -- generally smaller advertising structures that target both vehicular traffic and pedestrians on major traffic arteries and city streets.
Lamar also lays claim to being the largest provider of logo signs in the United States, with 24 of 26 available state contracts and more than 151,200 of them in those 24 states and Canada. That's those signs that use company logos to advertise gas, restaurants, camping, and lodging available off the next exit on interstates and other major highways.
Then there's that advertising space the company leases to advertisers to display inside and on the exterior of public transportation vehicles, shelters, and benches and in airport terminals in 22 states and Canada.
Lamar Advertising operations
Lamar employs about 3,600 people at office locations in 43 states and in British Columbia and Ontario, including about 250 at its Baton Rouge headquarters. At the end of 2019, it employed about 1,060 local account executives in its 126 local operating offices, and 15 of them employed billposters and construction personnel.
The company also leases an additional 130 operating facilities and owns more than 8,900 parcels of property beneath its outdoor advertising structures. Plus, it leases more than 74,300 active outdoor sites -- accounting for about $287.6 million in 2019 lease expenses, or about 19% of billboard advertising net revenues for that period.
"These leases are for varying terms ranging from month-to-month to a term of over 10 years, and many provide the company with renewal options. There is no significant concentration of displays under any one lease or subject to negotiation with any one landlord," Lamar's annual report says.
While it's a dominant presence in many of its markets, Lamar says it faces significant pressures from a changing regulatory environment and economic swings. Plus, a lot of competition, especially from larger companies with diversified operations. Examples include Clear Channel Outdoor Holdings (NYSE: CCO) and another REIT, Outfront Media (NYSE: OUT).
With their presence in television, radio, and other media, "these diversified competitors have the advantage of cross-selling complementary advertising products to advertisers," the company says.
Despite all those pressures, Lamar Advertising, which went public in 1996 and is still largely held by a small group of connected shareholders and board members, has done well focusing on its narrow niche.
Lamar Advertising income, stock, and dividends
In 2019, Lamar reported net revenues of $1.75 billion, up from $1.63 billion in 2018. Net income was $372.1 million, up from $305.2 million the year before. Net income per share was $3.71, up from $3.09 per share, and it paid out $3.84 in cash dividends per common share in 2019, up from $3.65 in 2018.
Then, on Nov. 5, the company released third-quarter results that showed a 15.7% decrease in net revenue from the year-ago quarter, to $386.1 million from $457.8 million. Net income per diluted share was $0.62 and $0.99 for the three months ended September 30, 2020, and 2019, respectively.
But those numbers were higher than the second quarter, reflecting a recovery that gave the company the confidence to revise its 2020 guidance to "reflect our expected recovery from the COVID-19 pandemic during the fourth quarter 2020." It now expects net income per diluted share for fiscal year 2020 to be between $1.99 and $2.16 and diluted adjusted funds from operations per share (AFFO) to be between $4.65 and $4.85.
The company also declared a dividend of $0.50 per share on Dec. 1, giving it a payout of $2.50 for all of 2020 after consecutive quarterly payouts of $0.90 to $1.00 dating back to March 2018. At a closing price of $81.39 on Dec. 24 -- well off its 52-week low of $32.33 and with room to run to its 52-week high of $96.19 -- Lamar stock was yielding 2.46%.
The Millionacres bottom line on Lamar Advertising
Compared to its competition, Lamar Advertising is a highly concentrated operation, with an exclusive focus on those three areas of outdoor advertising: highway logos, highway and street billboards, and transit systems.
But it has a diverse geographic and customer base. According to that 2019 annual report, Las Vegas accounts for 3.0% of its total displays, followed by New York and Pittsburgh at 2.5% and 2.3%, respectively. Twenty-four other markets split up the rest.
As for industry, service accounts for 14% of its billboard advertising revenues followed by healthcare and restaurants at 11% each with eight other segments sharing the rest.
With a long history of adapting to changing conditions within its industry, and of paying dividends to shareholders, Lamar Advertising could merit consideration for many a real estate investing portfolio.