CTO

CTO Realty Growth ($CTO) Executives Show 'Confidence Buying' After Critical Report...Turnaround Signal Amid Dividend Concerns?

06/26/2025 18:01

Top executives at CTO Realty Growth ($CTO) made simultaneous insider purchases on June 26, drawing significant investor attention. President John Albright acquired 3,800 shares at an average price of $17.05 per share, investing a total of $64,808, while Senior Vice President Daniel Smith purchased 1,000 shares at $17.00 per share. CTO Realty Growth is a Florida-based retail-focused REIT specializing in high-growth markets across the Southeastern and Southwestern United States. The company owns and operates shopping centers and commercial real estate properties, pursuing an aggressive acquisition strategy to expand its portfolio. In Q3 2024 alone, the company deployed approximately $191 million in investments at an attractive weighted average yield of 9.5%. The timing of these executive purchases is particularly noteworthy. They occurred just one day after Wolfpack Research raised concerns about CTO's financial practices, causing a 3% stock decline on June 25. Wolfpack alleged that since CTO's REIT conversion in 2021, the company has relied on equity issuances to cover a $38 million dividend funding gap. The fact that top executives purchased shares immediately following this critical report signals strong confidence in the company's financial health and future prospects. Examining the stock chart reveals that CTO reached a high of $19.85 earlier this year before plunging to the mid-$16 range in April, then trading sideways around $17-18 in June. The executives' purchase prices around $17 align with current trading levels, suggesting they view the current valuation as undervalued. CTO's fundamentals support management's confidence. Q3 2024 revenue reached $31.81 million, up 27.3% year-over-year and beating analyst estimates by $1.66 million. Core FFO increased 6% to $0.50 per share, while rent spreads showed healthy 12% growth. Occupancy remains strong at 95.8%, demonstrating operational efficiency. However, investors should carefully consider several risk factors. The company operates with high leverage, with debt-to-equity exceeding 100%. While the dividend yield reaches 8.9%, the payout ratio of 249% raises sustainability concerns. The company currently operates at a net loss with negative earnings per share, lending some credence to Wolfpack's criticism about dividend funding through equity issuances. Positive factors include a 22% operating margin and stable cash flows characteristic of rental operations. Recent acquisitions are expected to contribute meaningfully to profitability improvements. The company's focus on Southeastern and Southwestern markets benefits from continued population growth and economic expansion in these regions. Market conditions are also improving. The late-June Iran-Israel ceasefire news drove global markets to record highs, improving risk appetite. Growing expectations for Federal Reserve rate cuts create a favorable environment for real estate sectors. The insider trading pattern reveals interesting dynamics. In August and September 2024, Director Christopher Haga sold 3,000 shares each month, while President Albright sold 29,488 shares in November. Albright's return to buying after seven months suggests either fundamental changes in the company's situation or his belief that the current stock price represents attractive value. Key upcoming catalysts include Q3 earnings results and potential changes to dividend policy. If the company transitions to a sustainable dividend structure, Wolfpack's concerns would be addressed, validating insider purchases. Conversely, continued dividend burden accumulation could maintain stock price pressure. In conclusion, CTO Realty Growth's executive purchases appear to reflect confidence in fundamental improvements beyond mere stock price defense. However, high leverage and dividend sustainability issues remain risk factors requiring close investor monitoring as structural problems are addressed.