U.S. REITs: Longest Dividend-Paying Stocks — Tanger Outlets

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Tanger Outlets has enjoyed an incredible combination of growth and track record. This shopping centers company has emerged as a top operational performing REIT in our US equity REIT ranking. In addition, shareholders have benefited from a 22 year history of either same or increased quarterly dividends. Although there are a plethora of experts that have recently predicted the demise of shopping centers, Tanger continues to not only survive, but also thrive by expanding their footprint. Just take a nice drive to a property and see it for yourself.

I have to say that shopping centers are not our preferred sector. The category is close to other retail sectors, including free standing, and regional malls, in terms of dividend growth potential. This refers to the potential of an average REIT, nothing more or less. Regardless, Tanger has an ideal profile for people that invest in dividend stocks.

chart02.pngSeveral long dividend-paying stocks have good records in our analysis. Many have accumulated twenty plus years of steady dividend payouts, however the benefits end there for several of them. Many of these same REIT stocks have an average or below average cash flow generation, or profitability. That being said it is fine to enjoy the benefits of a stock’s accomplishment, especially if they have durable dividends. Funding is less costly providing them with access to better deals, and management is more commitment to making the dividend payments. With Tanger Outlets investors can actually have both.

For example, the company’s Q3 performance has been on par with their Q2 figures. Funds from operations (FFO) per share have increased by 13 percent year over year versus 15 percent in Q2. The dividend is still 19 percent higher than it was last year, and the 2015 FFO per share is expected to gain 20 percent.

Although the stock appears to be fairly priced, (price to FFO 15.5x versus the sector median of 16.3x), and dividend yield is at 3.4 percent, which is on the low side for a REIT, it is actually down 16 percent from its peak last January.

Source: Tanger Factory Outlet Centers, Inc. (NYSE:SKT) 

Disclaimer: This newsletter 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. Please do your own due diligence before making any investment decision. 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.

U.S. REITs: Longest Dividend-Paying Stocks — Monmouth Real Estate

chart00Our rankings for the US REITs highlight a stock that is in the bottom positions of the industrial sector–Monmouth Real Estate—which invests in single-tenant, net-leased industrial properties on long term leases. Although it has distributed the same or increased dividends for 23 years and has a yield of 6.5 percent, Monmouth has not shown the great performance that Terreno Realty and First Industrial have. If we focus almost exclusively in operational metrics, our rankings show that having a good track record doesn’t necessarily translate into growing dividends.

chart01In October, things improved slightly, when after a ten-year hiatus, Monmouth finally increased its quarterly dividend from $0.15 to $0.16, a 7 percent bump; even with that, though, we haven’t changed our minds about them. The company still makes distributions that are higher than its available funds from operations and seems used to that situation. Even through periods of recession, and despite a poor FFO performance, the company kept making steady distributions.

chart04A characteristic specific to Monmouth is its tenant concentration. Investment-grade tenants have provided 85% of its rental revenue and over half of that comes from a sole tenant–FedEx Corporation. The relationship with FedEx dates back decades and as the company loves to say “time opens doors”. In fact, the company was founded in 1968 and is one of the oldest REITs around.

As Monmouth loads up its acquisition pipeline with more FedEx deals, President and CEO Michael Landy says:

“Years ago the question was a concern about our FedEx concentration and the predilection on Wall Street to be more diversified. And some people would have preferred us to have a retail portfolio secured by a diverse array of tenants such as Kmart and Sears and Radio Shack and Borders and Circuit City. And the fact is, those companies are all gone and those goods are still being consumed and those goods are all in our FedEx warehouses.”

Industrial REITs have benefitted from e-Commerce, which has fueled the need for warehouses.  The CEO continues,

“So I think diversification can be a terrible mistake. If you find a really strong company like FedEx, and we’ve been with FedEx since 1992, it really makes sense to increase your exposure. And what we’re seeing today, back in 1992 online shopping didn’t exist.”

We couldn’t disagree more.

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Another specific characteristic of Monmouth is its relationship with UMH Properties—a related REIT with which they share executives. They also share similar architectural aspects in their investor relations websites. UMH, a publicly-traded REIT, invests in manufactured home communities. Fifty-three percent of its acreage is concentrated on the Marcellus and Utica Shale Regions, whose boom “ran out of gas”.

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In summary, despite the track record and signs of growth, concentration has put us off.

Source: Monmouth Real Estate Investment Corporation (NYSE:MNR), UMH Properties (NYSE:UMH), Seeking Alpha

Disclaimer: This newsletter 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. Please do your own due diligence before making any investment decision. 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.

U.S. Industrial/Office REITs – Prospecting The Best Performing REIT Stocks

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We recently compiled an operational performance ranking of the best REIT stocks based on the Second Quarter results. Download our report free of charge>>

U.S. Self Storage REITs – What’s the Best Performing Company?

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We recently compiled an operational performance ranking of the best REIT stocks based on the Second Quarter results.

We tried to be as straightforward as possible because we want you to understand why particular stocks are leading the charts. We also constructed the operational performance ranking to be concise in order to show how we pick the key drivers of performance. Finally, we ensured… Download Report>>

U.S. Industrial REITs—How Are Small Cap Stocks Faring In Volatile Times?

I’ve been searching for a growth stock in the Industrial arena for my REIT portfolio. While large pure play Industrial REITs grew revenues between 6 and 11 percent last quarter, I’ve instead been entertaining the possibility of investing in two promising stocks whose growth rates have been more aggressive.

Sourced through Scoop.it from: www.gurufocus.com

STAG Industrial (NYSE:STAG) has suffered an amazing thirty-percent loss over the first eight months of the year, making it the worst performing stock amongst pure play Industrial Real Estate Investment Trusts, or REITs for short. To give you an idea just how incredible of a loss that is, Rexford Industrial (NYSE:REXR), the second worst performer, is down nearly half as much at eighteen percent. Another company that took a major hit is Monmouth Real Estate Investment (NYSE:MNR). Their share price fell by fourteen percent. All three companies are small capitalization stocks with a market cap below $1.2 billion.

That being said, STAG Industrial happens to be a stock with a greater chance for a quick recovery if the market bounces back to normal levels. STAG has a price to FFO of 12x, which is significantly below the average of 16x, and the small cap average of 16x. Operationally, we do not believe it is amongst the best, but the current market has beaten down the company mercilessly. We do see STAG as a short-term purchase. At least, if the stock does not appreciate, you will be able to profit from their eight-percent dividend yield.

In the Industrial REIT arena, small cap stocks have suffered far more than larger cap stocks. While larger cap stocks have returned an average of negative ten percent year to date, small cap investments are at negative sixteen percent. The general perception is that small cap stocks are far more vulnerable to volatile markets, and those figures appear to reinforce that perception. Although they are subject to larger swings, small cap stocks enjoy a greater upside because of their growth potential.

Terreno Realty Corporation (NYSE:TRNO) is the only small cap stock that has performed decently. So far this year, the company has a negative 1.4 percent return. Given all of the recent market ups and downs, especially considering the hits REITs have suffered, this figure is far better than average. We have performed extensive research on Terreno’s advantage over other Industrial REITs in our Q2-2015 Industrial REIT Ranking. The company is leading our ranking operationally, however not in yield or valuation criteria. Download our report for free.

Disclaimer: This newsletter 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. Please do your own due diligence before making any investment decision. 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.

Capitalization Rate Compression In Industrial Real Estate

Industrial Real Estate – REITS And Cap Rates

Sourced through Scoop.it from: seekingalpha.com

The biggest market capitalization industrial REITs continue to see compression in cap rates, a metric real estate investors use to estimate potential return on properties — the lower the cap rate, the higher the property valuation.

If you own REIT stocks, you will want to buy or develop properties at high cap rates, expect cap rate compression and consequent property value increase, and hope the share price will reflect that appreciation.

Before the release of Q2 results, Patrick Maloney, from Circle Industrial, has indicated that now is a good time to tap into the “compression movement.” As he pointed out, “Operational metrics continue to strengthen… yet current stocks are lagging.”

Mr. Maloney adds: “As yields continue to compress on the most obvious, conservative investments, the money is looking to other avenues to garner additional yield. Cap rates have been compressing moderately in class B assets and in secondary and tertiary markets…” That is one reason why people have been bullish about STAG Industrial.

Industrial REITs said about cap rates in Q2 earnings results:

  • STAG Industrial, which operates majorly in secondary markets in 37 states, acquired 12 industrial buildings consisting of 1.6 million square feet for an 8.4 percent cap rate, with properties in the acquisition pipeline also in that range. They have seen some compression since cap rates for acquisitions dropped from 9 to 8 percent over the past years. Development has been limited since they are extracting goods value from acquisitions.
  • First Industrial has seen 5 percent cap rates for 2015 acquisitions — definitely down from 6-7 seen last year — 7 percent development and (high) 4 percent property sales.
  • Prologis, which operates in the United States and overseas, has witnessed continuous cap rate compression in Europe for the past two years.
  • EastGroup, which operates in the Sunbelt states, has experienced continuous compression, particularly in acquisitions.
  • DCT Industrial, which operates large distribution centers in numerous US markets, believes cap rates are flattening but can see further development yield compression.

Curated by Heli Brecailo

Disclaimer: This newsletter 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. Please do your own due diligence before making any investment decision. 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.