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Last week, the release of the Federal Reserve’s (FED) minutes from April 30 to May 1 revealed that FED officials were concerned that the economy would not move closer to the Fed’s 2% inflation target due to the lack of progress in the past months. Some officials expressed reluctance to reduce rates anytime soon, while a few are considering another rate hike.
Bad inflation news tends to hit interest rate-sensitive stocks like 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, many by 5% or more.
However, REIT investors are often willing to withstand stock price volatility in exchange for the opportunity to buy these income producers when dividend yields rise. Here are three REITs that sold this week that now have dividend yields, especially compared to their five-year averages:
Real estate income
Real Estate Income Corp (NYSE:O) is a San Diego-based, triple-net lease REIT with more than 15,450 properties in 89 industries 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 consistently paid and increased its dividends for at least 25 years. Realty Income has increased its dividend 107 consecutive months and 125 times since its initial public offering in 1994.
Recent positive events include:
On May 6, Realty Income reported first-quarter 2024 operating results. FFO of $1.05 beat the consensus estimate of $1.04 per share. Revenue of $1.26 billion surpassed the consensus estimate of $1.10 billion. More importantly, Q1 2024 revenue was up 33.4% from $865.71 million in Q1 2023.
Realty Income also reaffirmed its full-year 2024 adjusted Funds from Operations (AFFO) guidance of $4.13-$4.21.
On May 17, Realty Income increased its monthly dividend by 2.1% from $0.2570 to $0.2625 per share, increasing its annual dividend from $3.084 to $3.150 per share. This marked the 647th consecutive monthly dividend paid by Realty Income, a record unmatched by any other REIT. The dividend is payable from June 3 to shareholders on June 14.
On May 20, BMO Capital analyst Eric Borden raised the price target for Realty Income from $57 to $58. Two weeks earlier, Borden maintained a Hold rating on the stock.
Despite these positives, Realty Income has lost 5.22% over the past five trading days. The dividend yield is 6.02%, well above the five-year average of 4.55%. Real estate income is down 8.93% this year, which could be a good time for investors to add to existing positions.
Highwoods Properties
Highwoods Properties Inc. (NYSE:HIW) is a Raleigh, NC-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 had its initial public offering in 1994.
Highwoods owns 27.6 million square feet of office space, with an occupancy rate of 88.5% as of March 31. The tenant base is well diversified by sector, with the top 10 tenants including Bank of America, the Federal Government, Met Life, Bridgestone America and PPG Industries. The company also owns approximately 120 hectares of land.
On April 23, Highwoods Properties reported first-quarter 2024 operating results. Funds from Operations (FFO) of $0.89 per share were in line with analyst estimates, but below the FFO of $0.98 per share in the first quarter 2023. Revenue of $211.275 million surpassed the Street estimate of $206.784 million, but was down slightly from $212.752 million in the fourth quarter of 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 or raises rates. Highwoods has lost 5.63% this week. The dividend yield now stands at 7.90%, well above the five-year average of 5.91%. Year-to-date, Highwoods has a total return of 12.91%.
NewLake Capital Partners
NewLake Capital Partners (OTC:NLCP) is an internally managed specialty industrial REIT based in New Canaan, Conn., with 31 properties totaling 1.6 million square feet across 12 states. Newlake Capital Partners specializes in triple-net leasing to cannabis companies, providing capital when needed.
Newlake was founded in 2019 and had its IPO in August 2021. Tenants include some of the largest companies in the cannabis industry, such as Curaleaf, Cresco Labs and Truelieve. As of March 2024, it had an occupancy rate of 100%, with an average remaining lease term of 14.3 years and an annual rental escalation of 2.6% for 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 of $0.45 and exceeded FFO of $0.48 in Q4 2022. Revenue of $13.02 million exceeded projection of $11.41 million and exceeded revenue of $12.18 million in the fourth quarter of 2022.
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 has leased one property 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, when the U.S. Drug Enforcement Administration (DEA) was set to reclassify marijuana from the Schedule I group to the less regulated Schedule III group. 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%. The current annual dividend yield is 8.18%. NewLake has only been paying dividends since September 2021, with an annual rolling dividend yield of 5.89%.
NewLake Capital Partners has a year-to-date total return of 26.48%.
View these 3 alternative real estate projects with high returns
The current high interest rate environment has been tough on publicly traded REITs, but it also presents a unique opportunity to realize extraordinary returns from private market investments. Check out these three high-yield offers with yields between 7% and 12%.
The Arrived private credit fund simplifies investing in short-term financing for real estate projects, guaranteeing attractive returns through quality residential real estate. With targeted annualized dividends of 7-9%, quarterly liquidity and a diversified pool of real estate-backed loans, this fund is an excellent addition to equity investments. The fund has a low minimum investment of $100 and is available to all investors. Click here for more information about the Arrivald Private Credit Fund.
The Ascent income fund seeks stable income from senior commercial real estate debt positions and offers attractive returns backed by real assets. With a historic distribution yield of 12.1%, payment priority and flexible liquidity options, the Ascent Income Fund is an important investment vehicle for income-oriented investors. For a limited time, beginning investors can invest in the Ascent Income Fund with EquityMultiple with a reduced minimum of just $5,000. This offer is only available to accredited investors. Click here for more information about the Ascent Income Fund.
Basecamp Alpine Notes from EquityMultiple offers another powerful short-term cash management tool, with a target APY of 9% over 3 months and a minimum investment of just $1,000. These notes offer high liquidity and attractive compound interest rates, making them an ideal choice for investors looking to build their income-generating portfolio. As a special offer, Basecamp Alpine Notes are exclusive to new investors on the EquityMultiple platform, giving new investors a unique opportunity to take advantage of these favorable terms. Alpine Notes are only available to accredited investors. Click here for more information about Basecamp Alpine Notes.
This article REITs Got Beat Last Week: 3 With Attractive New Yields originally appeared on Benzinga.com
