CTO Realty Growth: A High-Yield REIT with Strategic Resilience in a Volatile Market

In an era of economic uncertainty and shifting investor priorities, the search for reliable income streams has intensified. Among the contenders in the high-yield real estate investment trust (REIT) space, CTO Realty Growth (CTO) stands out for its compelling combination of geographic diversification, operational adaptability, and a dividend yield that dwarfs sector averages. With an annualized yield of 9.21% as of mid-2025, CTO offers a tantalizing proposition for income-focused investors. Yet, as with all high-yield assets, the question remains: Is this yield sustainable, or does it mask underlying vulnerabilities?

The Yield Attraction: A Double-Edged Sword

CTO's dividend yield has surged from 1.74% in 2020 to 9.21% in 2025, a trajectory driven primarily by a declining share price rather than organic growth in dividend per share. While the company has maintained a consistent quarterly payout of $0.38 since 2022, the lack of dividend growth since 2022 raises questions about its ability to reward shareholders beyond yield. However, this yield is not an anomaly. CTO's 9.21% yield is 38% higher than the Real Estate sector's 6.66% average, making it a standout in a market where many REITs struggle to maintain even modest payouts.

The key to CTO's appeal lies in its ability to balance yield with operational resilience. Its portfolio of open-air shopping centers, concentrated in the high-growth Southeast and Southwest U.S., is strategically positioned to withstand e-commerce pressures. These regions, characterized by robust population growth and consumer spending, provide a stable foundation for rental income. Unlike traditional malls, open-air centers often host necessity-based retailers (e.g., pharmacies, grocery stores) and offer convenient, car-centric access—features that remain relevant in a digital age.

Strategic Diversification: Alpine Income Property Trust as a Stabilizer

CTO's partnership with Alpine Income Property Trust (PINE) adds another layer of complexity to its value proposition. By externally managing PINE, CTO generates fee income and gains exposure to a broader real estate portfolio. This arrangement not only diversifies revenue streams but also insulates CTO from sector-specific downturns. For instance, if retail demand in CTO's core markets weakens, the management fees from PINE could provide a buffer.

This dual strategy—owning high-quality retail assets while managing a complementary real estate portfolio—enhances CTO's ability to sustain dividends. The company's management has demonstrated a commitment to disciplined capital allocation, prioritizing properties with strong tenant credit and long-term lease stability. Such prudence is critical in an environment where interest rate volatility and banking sector stress could disrupt REIT valuations.

Risks and Realities: A Cautionary Lens

Despite its strengths, CTO is not without risks. The company's reliance on a fixed dividend payout ($1.52 annually since 2022) means its yield is highly sensitive to share price fluctuations. A further decline in its stock price could amplify the yield but may signal underlying financial strain. Additionally, rising interest rates could increase borrowing costs, squeezing margins for REITs that rely on debt financing.

The broader macroeconomic context also poses challenges. Banking sector instability and supply chain disruptions could dampen retail activity, particularly in CTO's necessity-driven tenants. While open-air centers are less vulnerable to e-commerce than traditional malls, they are not immune to shifting consumer behavior.

The Long-Term Outlook: A Calculated Bet

For income-focused investors, CTO presents a compelling but nuanced opportunity. Its 9.21% yield is among the most attractive in the REIT universe, supported by geographic and operational diversification. However, the lack of dividend growth since 2022 and exposure to macroeconomic headwinds necessitate a cautious approach.

A prudent strategy would involve treating CTO as part of a diversified income portfolio, rather than a standalone holding. Investors should monitor the company's ability to maintain its dividend in the face of rising interest rates and economic volatility. Additionally, tracking the performance of Alpine Income Property Trust could provide early signals about CTO's operational health.

Conclusion: Yield with a Plan

CTO Realty Growth's 9.21% yield is a beacon for income seekers, but its true value lies in the structural advantages of its business model. Geographic diversification, strategic management of Alpine Income Property Trust, and a focus on resilient retail formats create a foundation for long-term stability. Yet, investors must remain vigilant about macroeconomic risks and the company's dividend trajectory. In a high-yield REIT environment, CTO offers a rare blend of income potential and operational adaptability—but only for those willing to balance optimism with prudence.