Tanger Factory Outlet Centers: Dividend Discipline and Strategic Expansion Fuel REIT Resilience

Tanger Factory Outlet Centers (NYSE: SKT) has carved out a reputation in the REIT sector as a dividend stalwart, combining steady payout growth with disciplined capital allocation. Over the past three years, the company has increased its quarterly dividend by 11% since early 2023, most recently raising it to $0.2925 per share in July 2025, payable in August. This consistency underscores its ability to navigate the retail sector's volatility while positioning itself for long-term growth. Here's why investors should take note.

Dividend Stability Anchored by Operational Strength

Tanger's dividend policy is underpinned by a robust balance sheet and a focus on free cash flow generation. While its dividend payout ratio based on net income briefly exceeded 100% in 2023, the Funds Available for Distribution (FAD) payout ratio—a more accurate measure for REITs—remained at a conservative 58%, ensuring dividends are sustainably funded. This metric, paired with a net debt-to-EBITDA ratio projected to drop to 5.2x-5.3x in 2025, reflects Tanger's financial prudence.

The company's Same Center NOI growth of 5.1% in 2024, driven by 13.3% average rental increases, further supports its dividend trajectory. Occupancy rates have held steady at 98%, a critical metric in an era of shifting retail demand. These operational metrics, combined with a well-diversified tenant base (over 700 brands across 3,000+ stores), create a stable revenue engine for dividend growth.

Strategic Moves: Expanding into High-Growth Markets

Tanger's recent acquisitions signal a shift toward higher-margin, mixed-use properties while maintaining its core outlet model. For example:
- The Promenade at Chenal (Little Rock, Arkansas): A 270,000-square-foot upscale lifestyle center acquired in early 2025, targeting affluent shoppers.
- Pinecrest (Cleveland, Ohio): A 640,000-square-foot mixed-use development with residential and retail space, expected to yield an 8% initial return.

These moves complement its existing portfolio of 37 outlet centers and three open-air lifestyle centers, which collectively occupy 16 million square feet. By diversifying into full-price retail and urban mixed-use assets, Tanger reduces its reliance on discount retailers alone, a strategic hedge against economic cycles.

Sustainability: A Competitive Edge

Tanger's 20 LEED-certified properties—representing 58% of its portfolio by space—and WELL Health-Safety Ratings across its U.S. centers signal a commitment to ESG principles. Such certifications not only attract eco-conscious tenants but also enhance property values. For instance, Tanger Outlets Nashville incorporates solar energy and water conservation systems, aligning with tenant demands for operational sustainability. This focus has earned accolades, including the 2024 Nareit Investor CARE Gold Award for investor communication excellence.

Risks and Considerations

No REIT is immune to macroeconomic headwinds. Rising interest rates could pressure Tanger's debt costs (though its weighted average interest rate of 3.5% and staggered maturities mitigate this risk). Additionally, shifts in consumer spending toward online retail could strain physical outlets. However, Tanger's high occupancy rates and lease renewal spreads suggest tenants still see value in its locations.

Investors should also monitor Tanger's July 31, 2025 shareholder meeting and its August 4, 2025 earnings report, where management will discuss Q2 results and 2025 guidance. Historically, earnings releases for SKT since 2022 have shown mixed short-term performance, with a 50% win rate within three days and 57% over ten days, though gains often faded beyond 30 days (win rate 14.29%). The strongest single-day gain was 2.26% on the day of the release. This underscores the potential volatility around earnings, favoring long-term holders over short-term traders. The company's $620 million credit line extension and strong liquidity ($55.7M cash) provide flexibility to weather disruptions.

Investment Thesis: A Balanced Play for Dividend Seekers

Tanger's combination of dividend growth, portfolio diversification, and ESG leadership positions it as a defensive yet growth-oriented REIT. With a current yield of ~4.2% (as of July 2025) and a track record of annual dividend hikes since 2010, it offers stability. Meanwhile, its expansion into high-margin markets and mixed-use developments could fuel FFO growth, supporting further payouts.

For investors seeking a REIT with both income and capital appreciation potential, Tanger's focus on prime retail locations and strategic acquisitions makes it a compelling pick. However, those with a short-term horizon should note its sensitivity to interest rates and retail sector volatility.

Final Take

Tanger Factory Outlet Centers exemplifies the REIT sector's evolving playbook: blend dividend discipline with portfolio innovation. Its recent moves into mixed-use and sustainable properties, coupled with a fortress balance sheet, suggest it's well-positioned to deliver steady returns even as the retail landscape shifts. For income-focused investors with a medium- to long-term horizon, SKT merits serious consideration.

Recommendation: Hold or initiate a position, with a focus on capital appreciation and dividend growth. Monitor upcoming earnings and macroeconomic trends for near-term volatility.