Last Week Sees Both Upward and Downward Changes

chart01The last week has been relatively uneventful for equity REITs, though there have been both upward and downward changes. For example, apartment REITs bounced back with an average rise of 2 percent, while similar increases were seen in single family homes and manufactured homes as well. In contrast, timber fell by 2 percent, which is enough to make this one of its worst weeks so far in 2016.

NexPoint Residential Trust was the single most successful equity REIT last week with a 10 percent rise, which is a natural extension of the 28 percent return that it has managed to earn so far in 2016. However, REIT investors should remember to be cautious with the small-cap, multi-family REIT because it shares the same fundamental problems as other REITs of its kind, which range from significant floating debt to high amounts of debt relative to its enterprise value. This doesn’t mean that NexPoint Residential Trust hasn’t been earning good returns, just that REIT investors should be aware of the risks as well as the returns.

chart02Meanwhile, Weyerhaeuser suffered a 6 percent loss. Partially, this is because it is in the middle of a transformation into a pure-play timber REIT, as shown by the recently completed disposition of its cellulose fibers segment. However, not everything is bad for timber REITs, which are expected to close 2016 with 1.2 million starts because of a still strengthening housing market.

chart03

Source: NexPoint Residential Trust, Inc. (NYSE:NXRT), Weyerhaeuser Co. (NYSE:WY)

Disclaimer: This is not a recommendation to buy or sell stocks. The highest-yield stocks are not necessarily the best portfolio investment choice. The purpose of this report — which is essentially a snapshot of information available on June 10, 2016 — is to reduce your stock analysis by enabling you to compare stock and sector performance. Please do your own due diligence before making any investment decision.

As of May 31, 2016, the equity REITs are constituent companies of the FTSE NAREIT All REITs Index. Companies whose equity market capitalization is lower than $100 million have been disregarded.

This report is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.

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