The other day, I introduced you to a handful of investments that &l;span&g;&l;a href=&q;https://www.forbes.com/sites/bradthomas/2019/02/12/5-reits-yielding-6-plus&q;&g;generate 6% income&l;/a&g;&l;/span&g; in the Real Estate sector&a;hellip; from five publicly-traded Real Estate Investment Trusts (REITs).
No, these are not those K-1 thingy&a;rsquo;s you have to wait for, and delay filing your tax return, or make you wait to get a refund.
Nope. These&a;hellip; are some of the battle-tested, portfolio-worthy, income-paying investments whose dividends hit your account every quarter. Some even can deliver the cash (or reinvest) every month &a;ndash; and I&a;rsquo;ll share about one of those monthly-payers, today&a;hellip;
Please recall that REITs, by law, under an act of Congress (circa 1960), must distribute most of their taxable income (at least 90%), paid out directly to investors, in the form of dividends. That&a;rsquo;s a nice way to participate in profits and returns, when owning Real Estate.
&l;p class=&q;tweet_line&q;&g;So, let&a;rsquo;s crack open the vault and find some REITs that can &a;ldquo;show you the money&a;rdquo; - at a level of 7% and more.&l;/p&g;
(To whet your appetite, we&a;rsquo;ll reach for some &a;ldquo;Great 8s&a;rdquo; &a;ndash; commendable REIT investments, paying 8% plus&a;hellip; in an upcoming article.)
But for today, let&a;rsquo;s get you thinking about these five players, and how they might fit into your portfolio.
Reminder: as editor of &l;a href=&q;https://esp.forbes.com/subscribe?PC=VE&q; target=&q;_blank&q;&g;&l;em&g;Forbes Real Estate Investor&l;/em&g;&l;/a&g;, with over three decades of real-world real estate experience as a developer, landlord, investor, analyst, and writer, I enjoy applying my experience, education, and hard-won lessons, to confidently offer these recommendations. Of course, you shouldn&a;rsquo;t bypass your own due diligence, to discover how these might work for you&a;hellip;
&l;em&g;(Note: the market, in general, has been enjoying a run-up in 2019, so in some instances, valuations may be a tad richer when buying at today&a;rsquo;s levels. Newsletter readers can consult our Intelligent REIT Investor Lab, for our Current Value price recommendations.)&l;/em&g;
&l;strong&g;Outfront Media, Inc.&l;/strong&g; (OUT) connects brands with consumers outside of their homes through one of the largest and most diverse sets of billboard, transit, and mobile advertising &a;amp; outreach assets in North America. The company is also implementing digital technology to enhance the ways advertisers engage people on-the-go. Q3-18 AFFO (adjusted funds from operations) came to $86.4 million (an increase of 10.5% over the same prior-year period) from increased local advertising revenues, a return to growth in national client spending, and double-digit increases in revenue from digital products.
Reported billboard revenues increased 6.7%; transit and other revenues increased 3.0%, due to growth in digital transit displays. Clients include the New York Metropolitan Transportation Authority. We currently recommend OUT as a STRONG BUY; not surprising - just before Christmas, its share price hit a 52-week low. The current dividend yields 6.74% (as of Friday&a;rsquo;s close).
&l;strong&g;Blackstone Mortgage Trust, Inc. &l;/strong&g;(BXMT) primarily originates and purchases senior mortgage loans collateralized by properties in the U.S. and Europe. The company is managed by Blackstone (BX), a private equity world leader in alternative assets with nearly $472 billion in assets under management (AUM); of that, $136 billion AUM is within the real estate sector. Blackstone&a;rsquo;s dominant platform in equity and debt provides valuable real-time proprietary market data that enables them to identify mispriced and/or out-of-favor asset classes more rapidly than competitors; and BXMT&a;rsquo;s relationship with &q;big brother&q; Blackstone Real Estate offers the commercial mortgage REIT thorough access to proprietary deal flow, and property and market information.
Last week&a;rsquo;s Q4-18 and Full-Year results showed BXMT grew the portfolio 42% in 2018 to a record $15.8 billion, with $10.7 billion in originations during the year (52 loans), and generating $2.90 of Core Earnings per share. Their Loan-to-Value averages 62%; and 96% of loans are floating rate, LIBOR-based, insulated from the valuation impact of rising rates. Credit facilities are also LIBOR-indexed and match fund assets. Blackstone Mortgage&s;s portfolio credit quality remains high, and I like having a piece of many trophy assets around the globe. BXMT is a BUY, with a dividend yield of 7.39%.
&l;strong&g;VEREIT Inc.&l;/strong&g;&a;nbsp;(VER) is a net lease REIT poised to profit. About a year ago, the company sold Cole Capital, its non-traded REIT business, to an affiliate of CIM Group. Significant, because it eliminated some of the complexity overhang surrounding the company&a;rsquo;s competing businesses, and thus simplified its core business model &a;ndash; to focus on its large, diversified single-tenant real estate portfolio. VEREIT owns about 4,000 free-standing buildings, totaling $15.5 billion in assets, leased to a variety of retail, restaurant, office, and industrial tenants. The company is internally-managed with a structure that provides stable and predictable rent stream payments. VEREIT&a;rsquo;s other lawsuits have been dissipating, and the company has substantial liquidity to use for settlements, and to reduce debt.
Last week, VEREIT settled with additional shareholders who&a;rsquo;d opted out of the remaining class action lawsuit, having to do with restated financial statements from 3 to 4 years ago. Investors, however, can benefit, as VEREIT shares are trading substantially below its bellwether peers, such as Realty Income&a;nbsp;(O), National Retail Properties (NNN), and W.P. Carey (WPC). Investors can take further comfort that VEREIT&s;s dividend is well-covered by AFFO (76% payout ratio), with a solid 6.65% dividend yield (as of Friday&a;rsquo;s close). VER is a BUY.
&l;strong&g;Apple Hospitality REIT, Inc.&l;/strong&g; (APLE) &l;em&g;,&l;/em&g; owns more than 30,800 guest rooms, in 88 markets throughout 34 states. Franchised with industry-leading brands, the company&a;rsquo;s portfolio consists of 241 hotels - 114 Marriott-branded, 126 Hilton-branded, and one Hyatt. It&a;rsquo;s one of the largest portfolios of upscale, select-service hotels in the United States, serving business and leisure travelers, in high-quality hotel properties with attractive upside potential, in urban, high-end suburban and developing markets. Q3-18 results were impacted by restoration activities related to prior year Hurricanes Harvey and Irma, Mid-Atlantic Hurricane Florence in September, and competitive pressures in markets.
The company also contracted the sale of 17 hotels for approximately $181 million; sold two hotels in Columbus, Georgia, for $10 million (breakeven), and repurchased over 1.6 million shares of stock since quarter end. Apple Hospitality spent approximately $43 million in capital expenditures the first nine months of 2018, with another $25 to $30 million anticipated for the rest of the year - including renovation projects for approximately 20 to 25 properties. Although we are underweight in the Lodging sector, we believe Apple offers investors an attractive dividend of 7.33% (paid monthly). We maintain a BUY.
&l;strong&g;Ladder Capital&a;nbsp;Corp &l;/strong&g;(LADR) provides fixed-rate and floating-rate commercial mortgages, mezzanine financing, and preferred and direct equity to partners. Since Q1-15, the company has generated an impressive 8.5% CAGR (compound annual growth rate) - a return unique among its peers; assets now total over $6.4 billion. Q3-18 generated $63.4 million of core earnings, with a core after-tax return on average equity of 17.1%; the company also originated $676.7 million of loans, and its portfolio of balance sheet loans increased to $3.8 billion - almost $1 billion over the prior four quarters.
Ladder is the only internally managed commercial mortgage REIT; insider ownership exceeds 12%. With a low payout ratio, and special &q;true up&q; dividend in recent years from profitable equity deals with one-time power boosts, Ladder rewarded investors several weeks ago with a special dividend of $.23 per share (on top of the regular Q4-18 dividend of $.34 per share). As 2018&a;rsquo;s top-performing commercial mortgage REIT, Ladder is also my 2019 top choice in the category, due to its strong earnings, dividend growth record, and best-in-class management team. LADR&a;rsquo;s dividend yields 7.4%. We maintain a BUY.
Seeking recommendations and data on other publicly-traded REITs? We watch over 100 of &a;lsquo;em, like no one else - with RE news, interviews, and valuable insights you can&a;rsquo;t find anywhere else. Get &l;a href=&q;https://esp.forbes.com/subscribe?PC=VE&q; target=&q;_blank&q;&g;&l;em&g;Forbes Real Estate Investor&l;/em&g;&l;/a&g;. Twelve monthly issues, fairly priced. &l;span&g;&l;a href=&q;https://www.bradtom.com/&q; target=&q;_blank&q;&g;Just click here&l;/a&g;&l;/span&g;.
I am long OUT, BXMT, VER, APLE, and LADR.&l;/p&g;
No comments:
Post a Comment