Published Fri, 18 Oct 2019 11:30:00 -0400 on Seeking Alpha
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As of 9/30/19 2CHYP, our high yield REIT portfolio, has been up and running for 3 years and a quarter. Over this time frame, there have been a variety of environments and REIT valuations have changed materially. At this time, we are facing a new challenge in that REITs as a whole are getting frothy.
How does one build a REIT portfolio in an environment where the REIT index trades at 22X 2019 FFO?
Well, it starts by being very different than the index.
Our dividend yield is 8.4% compared to 3.5% for the index and these higher dividends are well supported as our payout ratio is actually lower than that of the index. The key here is that 2CHYP’s price to FFO of 8.5X provides ample cashflow with which to pay dividends and still afford the underlying companies capital to reinvest in their businesses. The REITs constituting the index have a much harder time doing this as the 22X P/FFO translates to a cashflow yield of less than 5% for the REIT index.
Despite the high multiple of the index, there are still ample opportunities available in the REIT space. It turns out the bloat is concentrated in the names that received the bulk of the capital inflows as money came into the REIT space seeking bond alternatives. It was a seeming herd mentality with certain REITs getting all the capital flows despite minimal differences with other REITs that received... Read more
|Stock name||Last trade||P/E||Earnings/Share||Dividend/Share||Dividend yield|
|CBL & ASSOCIATES PROPERTIES||1.38||0.0||-0.95||0.35||27.34|
|PENNSYLVANIA REAL ESTATE INVESTMENT TRUST||5.68||0.0||-1.81||0.84||14.58|
|RLJ LODGING TRUST||17.42||22.0||0.79||1.32||7.69|
|MEDICAL PROPERTIES TRUST||18.94||7.3||2.61||1.04||5.30|
|SL GREEN REALTY||82.69||30.0||2.76||3.40||4.12|
|EQUITY LIFESTYLE PROPERTIES||132.21||44.7||2.96||2.45||1.90|
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