ADC

Agree Realty ($ADC) Insiders Buy $7M, Yet Three Straight EPS Misses—What's Behind the Dividend Hike?

01/13/2026 12:03

Agree Realty's ($ADC) board has purchased $7 million worth of shares over the past eight months, with every single insider transaction being a buy and zero sales. Director John Rakolta Jr deployed $6.7 million across five purchases from December 2024 to October 2025, while CEO Joey Agree bought $750,000 worth in two transactions during August and October. This concentrated buying pattern during a period of stock weakness deserves serious investor attention. Agree Realty is a mid-cap retail REIT operating 2,600+ properties across all 50 U.S. states, with 67% investment-grade tenants and 53.7 million square feet of leasable space. The company operates under a net lease structure where tenants cover operating expenses, taxes, and insurance, providing predictable cash flows. Rakolta is a former U.S. ambassador and chairman of real estate developer Walbridge, serving on Agree's board for over a decade. His buying represents conviction rather than portfolio adjustment. The timing of insider purchases is telling. Rakolta's most recent buy in October 2025 occurred when the stock had declined 7% from its $75 peak to $70. CEO Agree similarly bought around $72. Management is treating market pessimism as opportunity. The company delivered Q3 revenue of $183.2 million, beating expectations and growing 15% year-over-year. However, EPS of $0.43 missed the $0.45 estimate—marking the third consecutive quarterly miss after Q2 ($0.43 vs $0.45 expected) and Q4 2024 ($0.41 vs $0.43 expected). Revenue growing while profitability disappoints, yet insiders aggressively buy—how should investors interpret this paradox? The key is understanding Agree Realty's aggressive expansion phase. In October 2025, the company raised its investment guidance to $1.50-$1.65 billion. To fund this, management executed major capital raises: $341 million equity offering in April, $400 million 10-year senior notes at 5.6% in May, and a $350 million 5.5-year term loan in November. Over $1 billion deployed toward property acquisitions creates near-term EPS dilution as newly acquired properties require time to generate rental income while interest costs and share dilution occur immediately. Despite EPS misses, management increased the monthly dividend by 2.3% to $0.262 in October 2025, signaling confidence in long-term cash generation. The forward dividend of $3.08 yields 4.32%. Rakolta's purchases include automatic dividend reinvestment plan (DRIP) shares, indicating he's compounding dividend income back into equity accumulation alongside discretionary buys. Investor criteria should focus on: (1) Quarterly investment execution—Q3 deployed $451 million across 110 properties; maintain this pace through Q4 and H1 2026 or the growth story weakens. (2) Occupancy and rental escalation rates—with 67% investment-grade tenants, any deterioration signals fundamental risk. (3) EPS performance—if misses extend through Q2 2026, capital allocation efficiency becomes questionable. Bull case: Properties acquired in 2025 begin generating meaningful income in H2 2026, accelerating EPS growth. Analyst price target of $81.92 implies 14.8% upside. Fed rate cuts in 2026 reduce the real cost of the company's 5.6% fixed-rate debt and lower property acquisition costs. Base case: Steady execution maintains current trajectory with stock reaching $77-79 by year-end 2026. Bear case: Retail sector deterioration increases tenant bankruptcies. Consumer confidence declined for five consecutive months through December 2025, and weakening employment outlook could pressure omnichannel retailers to reduce physical footprints. P/E of 41.74x is significantly above typical REIT valuations of 15-25x—if growth slows, valuation compression is inevitable. Short-term outlook (1-6 months): Q4 earnings on February 10 are the first test. Consensus expects $0.43 EPS; another miss could push the stock to $68-70. Beat expectations with optimistic 2026 guidance, and the stock rebounds to $75-77. June Fed rate cut (100% probability priced in) provides tailwind. Long-term outlook (6+ months): Capital deployment efficiency determines trajectory. Successfully converting $1.50-$1.65 billion in investments into 2026-2027 income could drive shares to $85-90, while execution risk could see them fall below $65. Bottom line: Agree Realty prioritizes long-term asset growth over near-term profitability, and insiders are backing this strategy with $7+ million in personal capital. Three consecutive EPS misses cannot be ignored, but the 4.32% dividend yield provides downside protection. The February earnings report must demonstrate 2026 profitability visibility, or the growth-versus-earnings trade-off becomes untenable. For REIT investors, this is a test case of whether to trust management vision during temporary execution challenges.