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Spirit Realty: A 6.2% Yield With Room To Run

Published Wed, 10 Apr 2019 07:30:00 -0400 on Seeking Alpha

Co-produced with Beyond Saving and PendragonY for High Dividend Opportunities
Introduction
In our recent article “How To Protect Your Income From Falling Interest Rates-Part 2” we detailed REIT sectors that outperform through recessions. We wrote,
“We believe that the risk of a recession in the next two to three years is extremely high. Therefore, we want to move into a more defensive position with our portfolio, but we do not want to become overly defensive. Equities often rally, and sitting out of the market has an opportunity cost.”
We noted that one of our favorite defensive REIT sectors is “triple net” or NNN REITs. These REITs benefit from having long-term leases that make the tenant responsible for most property level expenses. This provides very stable revenues as the leases are designed to be predictable and are locations tenants intend to stay in for decades. It also provides for minimal and predictable expenses.
With proper diversification among tenants, sector and geography, NNN REITs provide very stable and predictable cash flows, even in tough times. Many NNN REITs actually raised their dividend last recession as most of their leases have modest automatic escalators.
The strength of the NNN REIT sector is not a secret and it has resulted in many of the REITs having high valuations and dividend yields below 5%. There's currently an opportunity for a REIT with portfolio quality and balance sheet metrics similar to premium peers, but... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
REALTY INCOME 68.31   51.0 1.34 2.71 3.92
NATIONAL RETAIL PROPERTIES 52.53   35.3 1.49 2.00 3.76

REALTY INCOME - O
REALTY INCOME - O  


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