Tanger Factory Outlet Centers (SKT 2.42%) has survived in fine fashion amid the retail apocalypse brought on by the rise of e-commerce and then supercharged by the pandemic.

The owner and operator of three dozen open-air upscale outlet centers in 20 states and Canada has seen its stock price rise by about 32% so far this year.

And after suspending and then slashing its dividend in half during the COVID shutdowns, the real estate investment trust (REIT) has bumped up its payout for the past two seasons and appears poised to continue increasing it, helping the share price.


The chart below shows how strongly Tanger stock has performed this year compared with the benchmark Vanguard S&P 500 ETF (VOO 0.92%) in both price and total return. Meanwhile, the collection of 32 retail REITs tracked by the Nareit trade group has produced a total return so far this year of just 0.6%.

SKT Chart

Data source: YCharts.

Building brand equity and customer loyalty

Tanger has built a lot of brand equity over the years as its outlets became synonymous with quality shopping experiences at discount prices. The 600 retailers that rent its space don't just benefit from this. They also preserve their own brand equity by selling off discounted goods while reducing how much they have to mark down the hotter stuff at their regular stores.

That positions Tanger to gain from the growth of the outlet retail market as consumers seek name-brand merchandise at lower prices. Its properties are also in major tourist destinations and shopping areas, including some highly visible locations off major interstates.

That roster of retailers is growing, too. The REIT plans to open its 37th center in October. It will have seven buildings in Nashville, Tennessee, that will include a community-gathering space as well as several retailers new to Tanger among its dozens of outlets.

Strong financials and growing optimism

The financials look good for continued share growth. The recent second-quarter report cited double-digit rent spreads (the percentage increase in rents on existing properties), occupancy growth, and renewal rates that are all trending above its historical averages.

That optimism extended into the company's outlook for the rest of 2023, now slightly higher for net income and funds from operations (FFO), a key measure of a REIT's ability to cover and, better yet, increase its dividend.

Tanger currently has a price-to-FFO ratio of about 12.3, which compares favorably with respected retail REITs like Realty Income at about 13.7 and Agree Realty at 15.2.

The balance sheet also appears solid, with a 5.2 ratio of net debt to adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), and 88% of its total square footage unencumbered by mortgages.

Steady as it goes, and it could be going up

Tanger stock currently yields about 4% at a share price of about $23.50 that's right in line with analysts' consensus targets. And with its blend of growth, resilience, and reliable returns -- including a dividend comfortably covered by a payout ratio of about 54% based on cash flow -- the REIT appears poised to continue its steady upward trend.