4 High-Quality REITs In Value Yielding 5% | FAST Graphs
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- เผยแพร่เมื่อ 1 มิ.ย. 2024
- REITs are most often thought about as income-producing investments. Although this is generally a true statement, REITs can also be great builders of wealth if invested in correctly. To invest in REITs correctly, it is imperative that the investor understand the true nature of the beast. Furthermore, it is also critical to pay attention to valuation when considering REITs for your portfolio.
Due to the dilutive nature of REITs, they are not generally known or thought of as fast growers. On the other hand, they are renowned for the consistency of their dividend growth and for the prodigious amount of income they produce for shareholders over time. Due to these factors, investors seeking reliable growth of capital coupled with a prodigious and growing income stream can utilize REITs as a predictable and important part of their long-term retirement planning.
However, the key to what is stated above is - as previously stated - investing in them correctly. REITs can be initially utilized for growth by reinvesting their dividends. Then, when income is needed, the dividends can be paid out providing exceptional income that investors can live off.
With this video, we’re going to take a dive into 4 high quality REITs that collectively yield more than 5% current income and can be purchased at attractive long-term valuations. In summary, these investments can be utilized to build wealth and/or produce significant income or both.
Time Codes:
0:00 - Introduction
3:52 - Digital Realty Trust (DLR)
11:36 - NNN REIT Inc (NNN) Fiscal Fitness
12:04 - WP Carey Inc (WPC) Fiscal Fitness
12:30 - NNN REIT Inc (NNN)
15:03 - Realty Income Corp (O)
16:13 - WP Carey Inc (WPC)
17:15 - Realty Income Corp (O)
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Disclaimer: FAST Graphs is a tool designed to reveal and present information related to financial data and investment metrics. It is not intended to provide specific advice or recommendations. Instead, it offers a comprehensive view of relevant data, empowering users to make informed decisions based on their own analysis. It's your first step to a more comprehensive research and due diligence process. In short, it is a tool to think with. The opinions in this video are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned.
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Thanks for the video. Could you please do an update video about Medical Properties Trust?
Boring.
@@operationcenterbravo Haha why did you watch it then fk face ..
Realty income for the win!
That's encouraging. I've been watching WPC the last few years and started buying more this past month between $70 and $72.
Would it be possible for you to give an update on MPW?
I had heard DLR may have a hard time paying their dividends.
@@kjay1856 Due to Data Center overcapacity in the market.
Thanks Chuck, another great analysis. I've been buying O and also NNN when they've fallen below 15P-FFO. This also corresponds to a div yield above 5%. Especially with O, it's a rare thing historically when it drops below 15P-FFO. Ultra safe increasing monthly income at great valuation, works for me
@@herbertraber7911 yes, it's a REIT, thanks for the info.. you pay for quality, safety of the dividend, credit worthiness, management, the best mix and diversity of business and tenants.Not what the point in time book value is. And like all investments, buy when it's undervalued- O fits all those parameters
@@herbertraber7911 great, go with bonds then. Enjoy the eventual cap-app, I know I will.
@@herbertraber7911If you always go for the safe "guaranteed" yield, your portfolio is destined to lag the broad market. If you present to me a company with a lasting history of quality and growth yielding the same as a short term bond, why would I overlook the opportunity to let that money compound for years at what is likely an increasing yield over time? By the time rates start coming back down, it will likely be too late to buy O at a 5% yield.
Rates go back down, the cost to borrow goes down, O can get better mortgage loans and the market will likely expand multiples. Then you see 4% yields on bonds...but probably O is back to yielding 4% too. Then you can give the same argument.
Could you please elaborate, on what is 15P-FFO?
@@aperson1181 the forward slash key doesn't work on my computer, I have to find one and copy to use it- so I used a dash- so it is Price/Funds From Operations, like the P/E you see often, only P/FFO is a better metric for REITS. A P/FFO of 15 means 15x the FFO is the current price. If you want to understand better the significance of FFO and Price to valuation, search and watch more Fastgraphs videos from Chuck Carnavale- he can explain it much better than I could
Thanks Chuck. Could you do an analysis video on tower REITs sometime? The major ones would be American Tower, Crown Castle and SBA.
Excellent report!! Own O, NNN, MPW, SPG, and OHI. Could you please evaluate UGI and NEP, especially if FFO or PE is better used to find true value?
Thanks.
I buy O whenever my IRA yields correspond with a 5%+ yield. So far, it's not too much...but it's slowly growing over time.
If possible, could you do an evaluation on VICI?
Thanks for another really useful & interesting video, Chuck! A suggestion for a future video(s): Evaluating a set of midstream oil companies.
Thanks Chuck, for the REIT masterclass. Cheers.
Always great analysis Chuck. I've been buying $WPC and $O recently. Always in the Roth IRA!
I like DLR,
But its not my Prior at moment.
I like at moment 3M, PFE, TFC, SWKS, FNF, AMT, TROW, UGI and BAT.
Came here to say this is a good list. I like PFE, TFC, FNF, and UGI. AMT is good but CCI is a better value at the moment. 3M I am not sure a about.
Wonderful video Chuck, thank you so much from the Netherlands. Started using fastgraphs yesterday, love it!
Just great! Would like a similar video one on bdc's! Thanks, chuck!
Great review Chuck. Thank you.
Thank you for sharing. Great educational information.
Do you ever do videos on Preferred stocks? None in particular. But could you do a generic evaluation of Preferred stocks on FastGraphs.
Thank you Chuck. I am interested in buying Reality Income
Hey, Chuck. Thank ya!
Thank you very much Chuck! Can you do a similar video on Utility stocks? I am a dividend growth investor and I am interested if Utility stocks can keep growing the dividend for long periods of time if the free cash flow is negative. I used the FunGraphs and saw a pattern: these stocks keep on dilluting the shareholders by releasing new stock and also they are increasing steadily the short and long term debt (for example: UGI, Spire, Eversource energy, Nextera, Sempra). All of these stocks have been increasing the dividend for 2 decades and beyond but can they sustain the growing dividend if they have negative free cash flow and growing debt over time? Thank you very much!
Top video🔝💪👌
Thank you, this was helpful.
Thank you Chuck, great work. I've been watching DLR for some time and want to buy in the future. As for the REITs I would really like to see AMT analysis. I think it is well valued.
Thanks For all the information.
Another excellent video. Thank you.
When reinvesting dividends, do you account for the tax hit in the calculation?
I'm vexed by non-qualified REIT dividends in a trust account.
Might also be worth mentioning the different tax treatment of REIT dividends which strongly incentivizes holding REITs in a tax-free account.
Thanks Chuck. I see Buffett bought a Dump truck load of Capital One Financial stock. Curious if your FastGraphs tool can see the same value he seems to have found.
Hail this old man.
I tried signing up for Fastgraphs but due to some software issues on your site, it failed right out of the box. So I figured it best to abort the mission. Hope you get them worked out!
Thank you for your analysis. I think a good video would be top banks to add to your dividend portfolio. Especially in uncertain times with banks right now
th-cam.com/video/bvVVivecxlg/w-d-xo.html
A while back you recommended LNC a dividend yield 6.7% is great but its been taken the woodshed and then thrown in the wood chipper
Long on O and NNN. Likely add WPC within the next days.
The problem with Reits in the high rate environment is that you can get 5% plus risk-free in money markets. The volatility in Reits is not worth it. Also, the high intetest rates hurt capital appreciation and their ability to expand and pay investors as their profits are squeezed. Definitely time to start nibbling as they drop in price.
The incoming fixed income is all there is. The lower valuation perhaps instigated by rising rates present interesting capital appreciation opportunities from P/E ratio expansion in the future that you don't get from fixed income. Regards, Chuck
Chuck would you please take a look at WTRG
Thanks
Do you still have discount code BANKING ?
Chuck covers a lot of issues but one: Dividend Taxation - the % of the dividend, if any, that exceeds their earnings. The excess is a non-taxable Return of Capital or, your own money coming back, paid out of the REIT's capital, not its earnings. Yield looks great but deduct the Non-Taxable portion of the distribution to know the true yield from earnings.
Most REIT dividends are taxed at ordinary income. Here is a full discussion: www.thebalancemoney.com/how-are-reit-dividends-taxed-5192935
Based on price chart, CCI and ESS look interesting. Wondering if you want to cover those in a video.
Yes they both look good, REITs have been correcting because of the rising interest rates. This is more about investor psychology and fundamentals. Regards, Chuck
Hey Chuck and investing family, what are the tax consequences for holding REIT’s in your taxable account ?
Rather hold O and WPC than MPW. Too much risk in MPW.
what is the difference between the blue and orange line is the orange line like a sector average and blue one is the company average ?
The blue line is a trimmed average market has valued the stock over the timeframe being measured. The orange line is based on a formula designed to illustrate intrinsic value based on discounting cash flows.
How often are forecasted numbers updated? Do they change after quarterly earnings are reported?
When analysts update their forecasts they report them to FACTSET our data provider and we update within 24 hours. However, estimates typically don't change in this analyst see a reason to change them
Can you do SMG please
Did something happen to the video quality? I can't read the "view" headings at the top. Minute 2:08
Go to your settings gear and click "Quality" and put on HD or 4K
@Fastgraphs what do you think about Agree Realty income? 🤔
I would call it fully valued but not overvalued. I consider it attractive here for the dividend. Nevertheless, I would need to see it a little cheaper for me to be interested. Regards, Chuck
@@FASTgraphs thank you for your answer. Information i can work with.
What type of REITs are the most attractive from a dividend income and dividend growth perspective ?
Are Triple NET-lease REITs the best option ?
When I look at their dividend of $1.22 and then their earnings that are just a tiny part of that amount, is that because earnings are what's left after the dividend has been paid?
Is that true of all REITs?
You need to look at FFO or AFFO when you are looking at real estate investment trusts. Earnings are not a good metric because of all the accounting adjustments associated with real estate. FF0 is a form of cash flow which is where the dividends come from. Regards, Chuck
@@FASTgraphs
Thank you for your very kind reply, but I don't understand FFO or AFFO and wouldn't know where to find them, or if I did understand what they mean.
But when I look at DLR on my Tradingview chart and see the dividend it paid on 6/14/23 was $1.22 and then the earnings it reported on 4/27/23 was $ 0.19, and then further back to the dividend of 3/14/23 was the sane $1.22 and the earnings of 2/16/23 were -$ 0.02.
Then again on 12/14/2022 that same dividend of $1.22 with earnings of only $ .75 makes me wonder how a company can pay out far more than they earn and not go out of business and the reason for my original question.
As I go back into previous years I find occasionally the December earnings will be higher than the dividend but not high enough to make up for the other quarters, and why I asked if earnings on that REIT are only considered what the company earned after the dividend was paid out.
@@WeekiWacheeMax you would find them on FAST Graphs if you are a subscriber. You can also go to the companies websites and look at their financials. The problem with earnings especially GAAP earnings when evaluating REITs is that they include a lot of accounting convention because of their real estate investments. However, it is important mentioned that REITs are required by law to pay out 90% of the distributable income which is a cash item and therefore a better metric to evaluate REITs by.
@@FASTgraphs Joining FAST Grasps wouldn't change the answer of when I look at a dividend of $1.22 for Digital Realty for June and then its previous earnings in March of 21.5 cents, the question still remains is the earnings they're showing are what's left after the dividend has been paid? The $1.22 and the $.215 makes the $1.22 85% and close to the required 90%.
If you don't want to tell me, just say so.
@@WeekiWacheeMax it would if you look at the proper metrics for a REIT
Dlr is the only one I don't own.
So reinvesting dividends can help you achieve a better yield on cost, yet we dont want to buy when prices are inflated. What is the best way to handle it when these 2 statements are at odds with each other?
dollar cost averaging
Another way to handle that is to turn DRIP off and buy what looks attractive at that time. Maybe it's the same company. Maybe it's a different one. "Reinvest dividends" doesn't always mean they have to go right back into the same company the day you earn them. You could even save them up and buy reinvest them into the same company when it looks attractive again. Or, as Chuck suggested, DCA.
@@xaldath4265 look at your laboriously long paragraph full of "looks like", could, if, compared to FG or CC's three word answer- there's a reason humans micro-managing a port can't beat an index almost always- especially in the long term. Reinvest those divs, keep the div payout and share count moving up, once you have the cos .
What do you think is causing the price drop now?
Previous overvaluation vulnerable to a negative catalyst like rising interest rates.
where was the WPC part?
I covered WPC at 12: 04 and 16:13 you will find the details at the written portion below the video. Regards, Chuck
@@FASTgraphs Thanks Chuck ! Greez from Germany
Results are skewed by very low interest rates. With Howard Marks' "Sea change" I doubt they will be good investments for next few years.
Low interest rates are what caused REITs to be overvalued over the last several years. Rising interest rates are what brought the prices down to intrinsic value. Consequently, I would argue that REITs are more likely to be good investments going forward because the valuations have now become attractive. The poor performance of rising rates has already been priced in if you look closely at the graphs in this video. Regards, Chuck
@@FASTgraphs I'm not sure. Their growth is calculated during low interest rates. Historical growth may be a lot different then future and it might turn out they are expensive now.
Bxp is the only one to consider
for you maybe. . they have a whole lot of urban office space-that's in a secular decline post Covid, WFH is not a fad. That's why BXP has taken such a nose dive- I wouldn't bottom fish for it, a hold maybe, but good luck
Thanks but this analysis is largely flawed as REITs issue shares to raise capital, thus you need to have ALL graphs on a PER SHARE basis. TOTAL AFFO is meaningless. Case in Point: Realty Income grows FFO 8% a year but issues 6% more shares each year. That results in a low low low +2% AFFO growth per share, which is mostly from rent esclators.
The graphs are on a per-share basis
Jim Chanos tweets often about DLR under @WallStCynic. He’s bearish as am I.
Iwas bearish when it was overvalued,but not now