I have been searching dividend stocks for over a year, and am really excited to invest in companies like T, ITW, and MMM. However, I just started looking into high-yield REITs. Seems like since REITs are required to pay 90% of their income as dividends, then a high yield would be much more sustainable. Yes, it is less growth. But the compound potential of an 11% REIT that pays every month would DESTROY a 3% stock that pays quarterly. I know REITs aren't as predictable, (or at least, I think they're not) but are they even safe? How do I tell? Their balance sheets look horrible, so I don't know how else to tell.
I don't know the answer to your questions, but some REITs are really enticing and do have growth. Like, you heard of cloud computing? A way for companies to have computers without owning the computers; well those servers need to be stored somewhere, and you can find REITs that specialize in renting the land for those server farms. Then there's REITs that get rents from hospitals -- no one's going to shut down a hospital right, with our aging population? There's all kinds of REITs, it's not just getting rents from malls. The big ones that I've heard about are EQIX and O, OHI. Also COR and CONE.
Ticker: DEA, Easterly Properties is supposed to be a good one, they rent to government entities, and it is said that the government has surplus funds set aside specifically for the payment of these rents. Slow growth but rock solid. http://ir.easterlyreit.com/
I like REITs. Not all REITs, of course. 5 years ago, you couldn't give REITs away. In 2010, I picked up a lot of a REIT which featured market cap + debt of less than half the asset value. It was a 1/2 price sale on R-E. That holding grew so much and so quickly, it was the core of our portfolio for several years. Those sort of Cinderella stories don't come along very often. To take advantage of them with confidence, you need to understand R-E markets and do your own research. The other thing with REITs is they compound monthly, using a synthetic DRIP. This can add a lot to the returns, over the years. A REIT with 8% trailing yield will produce closer to 9% if compounding monthly. Keep this in mind: - legions of people have been predicting an impending R-E crash since 1978 - weighted average lease expiry (WALE) will provide an indication of how stable the income stream is - REITs do well when set up to DRIP due to the monthly compounding - it's not hard to find a REIT that you can invest a given amount of money, DRIP it for 7 or 8 years, and extract 100% of the original investment while still having an equivalent amount of REIT stock
REIT's are different animals from regular stocks and require different ways to evaluate them Check this article at: https://www.investopedia.com/investing/how-to-assess-real-estate-investment-trust-reit/ and also look at Seeking Alpha and look up an author named Brad Thomas. Check a few of his articles on how he looks at reits. He is well known and very good.
Griff, I primarily worry about these things: - if you look at the EPS for the last few years, does it appear the distribution is sustainable? - debt should be 60~80% of the asset value - it's not difficult to look at a sampling of assets and guestimate if they are worth the cited values - do it - is management stable? How long since there was a change? - do look at the WALE - I like to consider the long term stability of the portfolio. For example, I shy away from retail space REITs, as I feel retail is going away. Multi-family will always be needed. Industrial can be good or bad (needs a deeper dive).
@Gray Wolf & @TomB16 Thanks for your thoughts here on REITs. Very helpful. I also read a couple of Brad Thomas' articles last night and found them fun to read and very informative. Good tip Gray Wolf!
7 REITs Paying Huge Dividends 1:38 pm ET July 20, 2022 (Benzinga) Print One of the big reasons for investing in real estate investment trusts (REITs) is the kind of dividends many pay. While Treasury bonds are just beginning to catch up with inflation, some REITs offer better yields as long as investors are willing to accept the risks attached to owning them. Here are seven REITs with better-than-average, hard-to-ignore dividend yields: AGNC Investment Corp. (NASDAQ: AGNC) is paying 12.6% at a price of $11.43. The Bethesda, Maryland-based company specializes in residential mortgage REITs backed via the Federal National Mortgage Association and similar government agencies. AGNC also invests in other kinds of mortgages or mortgage-related securities. In June, Bose George, the REIT analyst at Keefe, Brunette & Woods Inc., upgraded AGNC from “market perform” to “outperform.” Claros Mortgage Trust (NYSE: CMTG) is paying an 8.86% dividend at the current price of $16.92. It focuses mostly on commercial real estate loans in major U.S. markets. This REIT has “outperform” ratings from some of the top investment firms, including Wells Fargo & Co. (NYSE: WFC) and JMP Securities. JP Morgan’s analysts, on the other hand, recently reduced its rating from “overweight” to “neutral.” KKR Real Estate Finance Trust Inc. (NYSE: KREF) offers investors a 9.72% yield at today’s price of $17.64. It originates and buys senior mortgage loans secured by different types of commercial real estate assets. The concept is to preserve capital while offering a sizable dividend to shareholders. Raymond James Financial Inc.’s (NYSE: RJF) REIT analyst gave KKR a “market outperform” rating, and JP Morgan’s analyst has KKR in the “overweight” category. The company’s available common stock pays a 1.34% dividend yield. Annaly Capital Management Inc. (NYSE: NLY) is one of the highest-paying real estate investment trusts with a 14.57% dividend yield This mortgage REIT is mostly involved in agency securities, commercial mortgage loans and mortgage-backed securities. Annaly makes money based on the spread between interest earned on what it owns and interest payments on what it’s borrowed. Piper Sandler Cos.’s (NYSE: PIPR) analyst gives it a “neutral” rating while Keefe, Bruyette & Woods recently upgraded the REIT from “market perform” to “outperform.” Arbor Realty Trust Inc. (NYSE: ABR) is paying an 11.23% dividend yield. The company is involved in multifamily and commercial assets using a diversified portfolio of structured finance assets. The REIT sometimes buys real estate assets and invests in real estate-related notes. Piper Sandler has an “overweight” rating on Arbor and Raymond James ranks it as “outperform.” Vornado Realty Trust (NYSE: VNO) pays a 7.39% yield at its current price of $28.98. This REIT invests in properties in major markets including New York, Chicago and San Francisco. While Mizuho maintains an “underperform” on Vornado, the analysts at Truist Securities has the company as a “buy.” Dynex Capital Inc. (NYSE: DX) is a real estate investment trust paying a dividend yield of 9.6%. The REIT mainly invests in residential and commercial mortgage-backed securities. Analysts at Keefe, Bruyette & Woods like Dynex: They recently upgraded it from “market perform” to “outperform.” JonesTrading Institutional Services LLC analysts have a “buy” rating on the REIT.
