CTO

CTO Realty Growth ($CTO) Management's Second Cluster Buy Highlights 9% Dividend Yield...106% Debt Ratio Dilemma

09/17/2025 00:00

Senior executives at CTO Realty Growth ($CTO) have engaged in cluster buying throughout September, drawing attention to this small-cap real estate investment trust (REIT). President John Albright and four other executives purchased a total of 9,550 shares between September 11-16, marking their second collective buying spree following June's purchases. Based in Florida, CTO Realty Growth operates a diversified portfolio of retail-focused properties in high-growth U.S. markets. The company owns notable assets including Carolina Pavilion, Millenia Crossing, and Lake Brandon Village, while also serving as external manager for Alpine Income Property Trust, diversifying its revenue streams. With a market capitalization of approximately $547 million, this small-cap company employs 37 full-time staff. The timing of these insider purchases is particularly noteworthy. President Albright bought 3,800 shares at $17.05 on June 26, then added 6,200 more shares in September at $16.38-16.53 levels. Other executives including CFO Philip Mays and SVP Daniel Smith joined the buying at similar price points. This contrasts sharply with Albright's large sale of 29,488 shares at $20.71 in November 2024. These executive moves are significant as they occurred near the stock's 52-week lows, trading more than 20% below its peak of $20.88. The cluster buying immediately following Wolfpack Research's financial misconduct allegations in June, which caused a 3% stock drop, demonstrates strong management confidence. Financially, CTO presents a mixed picture. Revenue is expected to grow approximately 20% from $124.52 million in 2024 to an estimated $149.68 million in 2025, with quarterly growth rates maintaining 19%. Operating cash flow remains solid at $76.95 million (TTM). However, net losses of $37.66 million and negative ROE of -5.66% raise concerns. A debt-to-equity ratio of 106% and current ratio of 0.69 also question financial health. Despite these challenges, investors should note the attractive 9.17% dividend yield. Strong operating cash flows support dividend payments despite accounting losses. The stock's low beta of 0.54 also provides stability relative to market volatility. Industry outlook appears positive. The U.S. retail real estate market shows gradual improvement driven by population growth and consumer recovery, with CTO's high-growth market focus particularly well-positioned. Despite e-commerce expansion, experiential retailers continue expanding physical locations. Investors should monitor several key indicators. The Q3 earnings release on October 23 will be crucial for assessing whether net losses are improving. Debt-to-equity falling below 100% and current ratio exceeding 1.0 would signal financial stability recovery. For dividend sustainability, operating cash flow coverage ratios require ongoing monitoring. In an optimistic scenario, retail real estate recovery could drive rental growth and profitability improvements, while debt reduction strengthens the balance sheet. This could provide both dividend income and capital appreciation. The base case scenario likely involves maintaining current operating performance with sustained dividends but range-bound stock price. The risk scenario includes interest rate increases or recession pressuring real estate markets, potentially forcing dividend cuts and deeper stock declines. While management's repeated cluster buying sends a positive signal, the high leverage and persistent losses warrant caution. For income-seeking investors, CTO merits consideration, but prudent risk management suggests limiting position sizes within a diversified portfolio.