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Our High Yield REIT Portfolio

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.
Increased skewing
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
WP GLIMCHER 4.18   24.6 0.17 1.00 24.10
GEO GROUP 18.35   14.1 1.30 1.92 10.56
MACERICH 33.33   43.9 0.76 3.00 8.91
RLJ LODGING TRUST 17.42   22.0 0.79 1.32 7.69
IRON MOUNTAIN 34.14   28.4 1.20 2.44 7.29
MEDICAL PROPERTIES TRUST 18.94   7.3 2.61 1.04 5.30
STAG INDUSTRIAL 29.50   47.6 0.62 1.43 4.93
SL GREEN REALTY 82.69   30.0 2.76 3.40 4.12
SUN COMMUNITIES 145.94   95.4 1.53 3.00 2.14
EQUITY LIFESTYLE PROPERTIES 132.21   44.7 2.96 2.45 1.90


Older articles featuring Cbl & Associates Properties (CBL):
Dividend Cuts And Overdue Rent: REIT Earnings Recap
Dividend Cuts And Overdue Rent: Previewing REIT Earnings Season
Retail REITs: Double-Digit Yields, Secular Shifts And Mean-Reversion
We Need To Talk About Dividend Cuts - They Are A Necessary Evil
REIT Preferreds: Higher-Yield Without Excess Risk
Dividend Cuts And Overdue Rent: REIT Earnings Recap
Our High Yield REIT Portfolio - Optimizing Rebound Potential
Now Is Not The Time To Be A High-Yield REIT Investor
Macerich: Debunking Three Bear Theses, Including Why I Want A Dividend Cut
Introducing This Growing Dividend Portfolio