Capital Automotive Moving On

Motley Fool Income Investor selection Capital Automotive (NASDAQ:CARS) has received a buyout offer from clients of DRA Advisors LLC that seems just too sweet to pass up. At $38.75 per share in cash, it's a slight 4.7% premium to the value that our lead analyst, Mathew Emmert, had assigned to the company, and a 9% premium to the company's closing price last week.

After the transaction closes, Capital Automotive will continue on its path of acquiring solid-performing multi-franchise dealerships of vehicles from Honda (NYSE:HMC), Ford (NYSE:F), General Motors (NYSE:GM), and others in metropolitan markets, then leasing the space back to the dealers.

Given the healthy returns in the real estate investment trust (REIT) market over the last few years, and the relatively full prices of most REITs, I am mildly surprised to see such an acquisition announced. However, like fellow Income Investor selection American Financial Realty (NYSE:AFR), which focuses on the banking industry, Capital Automotive was basically peerless in its sector. Couple the lack of competition with triple-net leases that offer more secure returns, and it's a bit easier to understand the attractiveness of the deal.

It's certainly bittersweet to see a company with growth prospects, strong dividend payments, and room to grow its dividend get bought out. The ideal situation would have been to continue reaping the solid 5% dividend and enjoying the success of the business as it grows.

But while the buyout may disappoint our Income Investor subscribers, it's difficult to quibble with the final results of this recommendation. In just about a year, subscribers have received a 25.8% return vs. the S&P 500's 10.2% -- and that return is pretty much locked in now. Since the company will continue paying dividends until the acquisition is completed, investors stand to gain still a bit more by holding on to enjoy another dividend payment or two before they receive the full offering price of $38.75 per share.

Get in on the dividend action with a subscription to Motley Fool Income Investor. Sign up today for a 30-day free trial.

Nathan Parmelee owns shares in American Financial Realty, but has no financial interest in any of the other companies mentioned. The Fool has an ironclad disclosure policy.