Welcome Stockaholics!

We are a new and fast growing financial forum! Sign up for free and let's talk stocks!

  1. Do you want to help develop this community? We are looking for contributions from investors and traders like you! What stocks do you follow? What is hot right now? Sign up and get in on the ground floor of the newest, fastest growing financial forum!
    Dismiss Notice
  2. You will notice a live chat widget on the right. Click in to join us and lets hear about how you nailed that last UWTI trade!
    Dismiss Notice

Dividend Stocks vs Monthly REITs

Discussion in 'Ask any question!' started by Griff, Aug 14, 2019 at 8:47 PM.

Tags:
  1. Griff

    Griff New Member

    Joined:
    Jul 7, 2019
    Messages:
    9
    Likes Received:
    5
    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.
     
    Bodacious likes this.
  2. anotherdevilsadvocate

    anotherdevilsadvocate Well-Known Member

    Joined:
    Apr 3, 2016
    Messages:
    3,522
    Likes Received:
    2,153
    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.
     
    Bodacious likes this.
  3. Bodacious

    Bodacious Active Member

    Joined:
    Jul 6, 2019
    Messages:
    137
    Likes Received:
    92
    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/
     
  4. TomB16

    TomB16 Active Member

    Joined:
    Jun 22, 2018
    Messages:
    513
    Likes Received:
    196
    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
     
    Bodacious likes this.
  5. Gray Wolf

    Gray Wolf Well-Known Member

    Joined:
    Apr 3, 2016
    Messages:
    721
    Likes Received:
    385

    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.
     
    Bodacious likes this.
  6. TomB16

    TomB16 Active Member

    Joined:
    Jun 22, 2018
    Messages:
    513
    Likes Received:
    196
    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).
     

Share This Page