As the debate rages over the role that passive owners like ETFs play in big equity market moves, Tanger Factory Outlet Centers (SKT) is on pace to become the first stock majority owned by passive investors.
According to data from Bloomberg, Tanger Outlets' passive ownership share now stands at 46.85%, 31.5% of which is owned by ETFs:
|Top 10 Companies With Highest Passive Ownership|
|Ticker||Fund||% Passive Ownership||% Owned By ETFs||GICS Sector|
|SKT||Tanger Factory Outlet Centers Inc||46.85||31.50||Real Estate|
|MDP||Meredith Corp||40.49||29.56||Communication Services|
|WPG||Washington Prime Group Inc||39.16||23.62||Real Estate|
|RPT||Ramco-Gershenson Properties Trust||38.18||22.64||Real Estate|
|PEI||Pennsylvania Real Estate Investment||37.90||22.57||Real Estate|
|CBL||CBL & Associates Properties Inc||37.65||21.77||Real Estate|
|ABM||ABM Industries Inc||37.54||25.86||Industrials|
|KRG||Kite Realty Group Trust||37.26||21.19||Real Estate|
|UBA||Urstadt Biddle Properties Inc||37.01||21.38||Real Estate|
|CHSP||Chesapeake Lodging Trust||36.84||21.08||Real Estate|
Source: Bloomberg Intelligence. Data as of Oct. 25, 2018. Reprinted with permission.
"Tanger is the company I think foreshadows what the world might look like in 10, 20 years in terms of passive ownership," said Eric Balchunas, senior ETF analyst for Bloomberg and co-author of the research note announcing the findings.
Dividend ETF Tanger's Biggest Owner
Tanger Outlets is a real estate investment trust (REIT) that invests specifically in outlet shopping malls across the U.S. It owns and operates 42 shopping malls in 26 states.
By market value, Tanger's biggest stakeholder is the SPDR S&P Dividend ETF (SDY), which owns $257 million worth of shares in the company, according to ETF.com data.
SDY is a yield-weighted, high-dividend ETF that holds companies that have increased their annual dividends for at least the past two decades consecutively. Tanger Outlets is the fund's fifth-largest holding, at 1.6%.
At a glance, that proportion might look small. However, this 1.6% holding from an ETF worth $15.5 billion in assets comprises roughly 12% of Tanger's current market capitalization.
The ‘Zelig’Of Stocks
Predictably, the ETFs with the highest percentage of their portfolio in Tanger Outlets are all real estate ETFs; the fund with the highest percentage stake is the Invesco KBW Premium Yield Equity REIT ETF (KBWY), at 2.8%.
But Tanger shows up in 88 ETFs: value and growth ETFs, small-cap and midcap ETFs, total market funds, dividend ETFs and more, says Balchunas.
"It's the Zelig of stocks," he added, citing a 1983 Woody Allen movie in which the titular character is a man who can blend into any crowd.
High Dividends & ‘Smid-Cap’ Sweet Spot
According to Balchunas, there are two main reasons Tanger is so attractive to passive investors.
The first is its dividend yield of 6.3%, which is high even among REITs, an asset class that tends to pay out higher-than-average dividends. It has also consistently increased its dividend over time, making Tanger a juicy holding for dividend ETFs, such as SDY.
The second reason is that Tanger, with its market capitalization of $2.1 billion, exists in a sweet spot that potentially lands it in small- and mid-cap ETFs, depending on the particular fund's methodology.
"It just depends on where you draw your line," said Balchunas. "When you're a 'smid-cap' stock, that tends to boost your passive ownership."
Other High Passive Ownership Stocks
So it goes for the other nine stocks with the highest proportion of passive ownership, seven of which are REITs.
"REITs are so juicy that yield-seekers love them," said Balchunas, adding that the real estate is about 25% owned by passive investors, or 10% more than the industry average.
As for the two nonreal estate stocks in the top 10, Meredith Corp (MDP) and ABM Industries (ABM), both offer high dividend yields for their respective sectors of communication services and industrials. They also have a history of reliably increasing dividends over time, which has landed both stocks in SDY alongside Tanger.