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Last week’s release of the April 30-May 1 Federal Reserve (FED) minutes showed that Fed officials were concerned that the economy was not closer to the inflation target by 2% of the FED due to the lack of progress in recent months. Some officials have expressed reluctance to cut rates anytime soon, while a few are considering another rate increase.
Bad inflation news tends to hit interest-rate-sensitive stocks, such as real estate investment trusts (REITs), hard, and this week was no exception. Over the past five trading days, more than 80% of all REITs have lost ground, with many down 5% or more.
However, REIT investors are often willing to withstand stock price volatility in exchange for the opportunity to buy these income-producing companies when dividend yields rise. Here are three REITs that sold this week and are now showing dividend yields, especially compared to their 5-year averages:
Real estate income
Real estate income company (NYSE:Oh) is a San Diego-based triple net lease REIT with more than 15,450 properties in 89 areas and more than 1,500 tenants worldwide. The Monthly Dividend Company, as it calls itself, is a member of the S&P 500 and an S&P 500 Dividend Aristocrat, meaning it has been paying and increasing its dividends consistently for at least 25 years. Realty Income has increased its dividend for 107 consecutive months and 125 times since its 1994 IPO.
Recent positive events include:
On May 6, Realty Income reported its first quarter 2024 operating results. FFO of $1.05 beat the consensus estimate of $1.04 per share. Revenue of $1.26 billion beat the consensus estimate of $1.10 billion. But more notably, Q1 2024 revenue was 33.4% higher than Q1 2023’s $865.71 million.
Realty Income also reaffirmed its full-year 2024 adjusted funds from operations (AFFO) guidance of $4.13 to $4.21.
On May 17, Realty Income increased its monthly dividend by 2.1%, from $0.2570 to $0.2625 per share, increasing the annual dividend from $3.084 to $3.150 per share. This is the 647th consecutive monthly dividend paid by Realty Income, a record unmatched by any other REIT. The dividend is payable to shareholders on June 14 from June 3.
On May 20, BMO Capital analyst Eric Borden raised the price target on Real Estate Income from $57 to $58. Two weeks earlier, Borden maintained a Hold rating on the stock.
Despite these positives, Realty Income lost 5.22% over the past five trading days. The dividend yield stands at 6.02%, well above its five-year average of 4.55%. Real estate income is down 8.93% year to date, which could be a good time for investors to add to their pre-existing positions.
Highwoods Properties
Highlands Properties Inc. (NYSE:HIW) is a Raleigh, North Carolina-based office REIT that owns, develops, acquires, leases and manages properties in the southern cities of Atlanta, Charlotte, Dallas, Nashville, Orlando, Raleigh, Tampa and Richmond. It was founded in 1978 and went public in 1994.
Highwoods has 27.6 million square feet of office space, with an occupancy rate of 88.5% as of March 31. Its tenant base is well diversified by sector, with its top 10 tenants including Bank of America, Federal Government, Met Life, Bridgestone. Americas and PPG Industries. The company also owns approximately 120 acres of land parcels.
On April 23, Highwoods Properties reported its first quarter 2024 operating results. Funds from operations (FFO) of $0.89 per share were in line with analyst estimates, but lower than their FFO of 0. $98 per share in Q1 2023. Revenue of $211.275 million beat the estimate of $206.784 million, but was down slightly from $212.752 million in Q4 2022.
On May 6, Deutsche Bank analyst Omotayo Okusanya maintained a buy rating on Highwoods Properties and raised the price target from $28 to $31.
Office REITs have been hit hard every time the FED hints at or raises interest rates. Highwoods lost 5.63% this week. The dividend yield now stands at 7.90%, well above its five-year average of 5.91%. Year to date, Highwoods has a total return of 12.91%.
NewLake Capital Partners
NewLake Capital Partners (OTC:PLNL) is an internally managed specialty industrial REIT located in New Canaan, Connecticut, with 31 properties totaling 1.6 million square feet across 12 states. Newlake Capital Partners specializes in triple net leasing to cannabis companies and provides capital where needed.
Newlake was founded in 2019 and had its IPO in August 2021. Its tenants include some of the largest companies in the cannabis industry, such as Curaleaf, Cresco Labs, and Truelieve. As of March 2024, it has an occupancy rate of 100%, with an average of 14.3 years remaining on its lease term and an annual rent increase of 2.6% over lease terms of 15 to 20 years.
On March 11, NewLake announced its fourth quarter operating results. Funds from operations (FFO) of $0.51 beat estimates by $0.45 and exceeded their FFO of $0.48 in the fourth quarter of 2022. Revenue of $13.02 million beat the projection of $11.41 million and exceeded Q4 2022 revenue of $12.18 million.
Additionally, on March 11, Newlake Capital Partners increased its quarterly dividend from $0.40 per share to $0.41 per share.
On April 2, the Florida Supreme Court approved an initiative to legalize recreational marijuana in Florida through a referendum on the November ballot. Newlake owns property leased to Curaleaf Holdings in Florida and will benefit if the referendum passes. Several other Newlake tenants also have a presence in Florida.
More good news for cannabis companies came on May 1 as the U.S. Drug Enforcement Administration (DEA) prepared to reclassify marijuana from the Schedule I group to the Schedule III group, less regulated. The White House Office of Management and Budget must still review the proposal, followed by another review by an administrative law judge.
Over the past five trading days, NewLake has lost 2.64%. Its current annual dividend yield is 8.18%. NewLake has only been paying dividends since September 2021, with an annual dividend yield of 5.89%.
NewLake Capital Partners has a year-to-date total return of 26.48%.
Check out these 3 high-yielding alternative real estate plays
The current high interest rate environment has been tough on publicly traded REITs, but it also provides a unique opportunity to capture extraordinary returns on private market investments. Check out these three high-yielding offerings with yields between 7% and 12%.
THE Private credit fund arrived simplifies investment in the short-term financing of real estate projects, by offering attractive returns guaranteed by quality residential real estate. With an annualized dividend target of 7-9%, quarterly liquidity and a diversified pool of real estate-backed loans, this fund is an excellent complement to equity investing. The fund has a minimum investment of $100 and is available to all investors. Click here to learn more about the Arrived Private Credit Fund.
THE Ascent Income Fund aims for stable income from senior commercial real estate debt positions, offering an attractive return backed by real assets. With a historic distribution yield of 12.1%, payment priority and flexible liquidity options, the Ascent Income Fund is a fundamental investment vehicle for income-oriented investors. For a limited time, new investors with EquityMultiple can invest in the Ascent Income Fund with a reduced minimum of just $5,000. This offer is reserved for qualified investors. Click here to learn more about Ascent Income Fund.
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This item REITs were destroyed last week: 3 with attractive new yields originally appeared on Benzinga.com
