Three REITs For Income And Value In 2020

REITs Provide Steady, Stable Income

REITs, Real Estate Investment Trusts, are among today’s best cash-producing investment vehicles. Yields among the REITs can reach as high as 7% to 8%, far better than bonds, and they tend to exhibit far less volatility than the average stock. When it comes to your portfolio, Real Estate is part of the Real Assets Asset Class and a diversifying force for your investments. If you want to increase yield, create cash flow, and/or reduce the impact of market downturns REITs are a good way to do it.

Brixmor Property Group Is An Undervalued Growth Story

Brixmor Property Group (BRX) is an undervalued growth story among the Retail REITs. Trading at 11.2X its forward earnings the company’s P/E is below average for the group and well below industry leaders. Regency Income Corporation and Realty Income Corporation are both trading near 22X their 2020 FFO estimates which suggests a multiple-expansion could take place for BRX.

Brixmor’s growth story is fueled by expansion, acquisition, and upgrades that have had a profound impact on the bottom line. Net Operating Income (NOI) increased in the last quarter on a sequential and YOY basis, 2.2% and 4.4%, and is expected to continuing expanding in 2020.

Perhaps the biggest impact on the top and bottom-line growth is the company’s work with its tenants. Brixmor actively encourages tenants to change locations within existing properties as they become available. This allows Brixmor to maximize per-property revenue while aiding the businesses it relies on for that revenue. The company boasts a high 91.5% occupancy rate because of it.

Brixmor pays about 5.30% at today’s share prices. The company is a dividend-grower too, with five years of distribution increases under its belt, and an expectation of future increases. With the payout ratio a low 60% and the lowest for the Retail REIT group, future increases may be substantial.

Ventas: A Solid Play On Senior Housing At Rock-Bottom Prices

Ventas (VTR) is a diversified Healthcare REIT operating in five segments. The company recently reported earnings and saw its shares plummet to today’s low, low prices. Trading at 14.75X forward earnings the company is valued well below its peers.

The reason for the recent downdraft in prices is simple. The company banked on the senior housing market, investors bought into the story, and then the market didn’t develop as it was expected to do. It’s not that the need for senior housing disappeared, it just that the demand has not materialized as quickly as Ventas’ execs and investors had hoped.

What does this mean for Ventas? The expected return to FFO growth will not happen until next year. That said, the company is still expecting to return to FFO growth, it’s other four segments are firing on all cylinders, and the dividend is attractive. At today’s prices, Ventas is paying over 5.5%.

Invest In The Cloud With QTS Realty Trust

QTS Realty Trust (QTS) is a Specialized REIT focused on data-centers and digital infrastructure. The company owns and operates data centers primarily in North America and Europe. What makes it special compared to other Data Center REITs is its relationship with government entities. QTS Realty Trust is a leader in government-contracted data centers because of its high-quality services and security. What this means is high-barriers to entry and government contracts that enhance its real asset appeal.

At today’s prices, this REIT is yielding close to 3.35%. The company has a five-year history of distribution increases and one of the lowest payout ratios in its industry. There is an expectation for a distribution increase this year too.

Shares of QTS Realty Trust entered a small correction at the beginning of November but that move may already be over. The price action has formed a double-bottom at the $51 level and now indicated higher. There is resistance near $53.75 to be wary of, once that is broken a move up to the two-year high is likely. Longer-term, this REIT should continue to move higher as it grows revenue, FFO, and the dividend.