Brad Thomas, editor of Forbes Real Estate Investor, put together a list of real estate investment trusts to provide steady dividends for investors seeking an alternative to bonds, especially since bond yields have been slim since the 2008 financial crisis.
“A few of these REITs are not labeled as ‘sleep well at night’ REITs, but I am comfortable recommending them, based on their safety metrics and basic fundamentals,” he writes on Forbes.com. “I am pointing you towards a few higher-yielding REITs that are obviously riskier in nature, but not excessively hazardous in terms of their underlying investment profile.”
Here is Thomas’s list:
- Blackstone Mortgage Trust (BXMT) “is a commercial mortgage REIT that primarily originates and purchases senior mortgage loans collateralized by properties in the U.S. and Europe. As a more predictable mortgage REIT, the company’s loans are held for long-term investments with no impairments in the portfolio, and are not subject to mark-to-market accounting associated with securitization or other short-term business models. It’s just a really simple business model. BXMT is currently yielding 8.0% with a P.E multiple of 11.7 times.”
- Care Capital Properties (CCP) “is a relatively new REIT that began trading on August 2015 after spinning off from Ventas Inc. CCP is rooted in skilled nursing, and that particular sub-sector has strong growth characteristics. Since going public, CCP has under-performed because of the current skilled nursing environment. While I see no fundamental issue relative to CCP’s valuation, the healthcare sector has become more volatile as a result of the operator risks and governmental regulation. Accordingly, CCP is trading at a healthy discount, the dividend yield is 8.9% with a P/FFO multiple of 8.5 times.”
- Chatham Lodging (CLDT) “is an upscale extended-stay and premium-branded select service business model that invests in upscale extended-stay hotels and premium-branded select service hotels. The company owns 38 hotels with an aggregate of 5,675 rooms (and also has a 10 percent interest in two joint ventures owning 95 hotels).
- W.P. Carey (WPC) “is a pioneer in sale/leaseback financing, the REIT was one of the first companies to build a Net Lease vehicle to assist global companies to monetize free-standing real estate. Over the years, Carey has evolved into one of the largest Net Lease landlords in the world with a successful track record of investing through multiple economic cycles.”
“These four high-yielding REITs are attractive because of their potential for enhanced dividend growth as well as their above average price appreciation,” Thomas says. He disclosed that he owns shares in BXMT, CCP, CLDT, WPC, (OHI) and VTR.
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