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Our High Yield REIT Portfolio - Optimizing Rebound Potential

Published Mon, 06 Apr 2020 15:02:11 -0400 on Seeking Alpha

A 16% cash flow yield in our portfolio fuels a 10% dividend yield.
The strong cash flow yield makes the payout ratio of our portfolio lower than that of the REIT index.
We are in sectors that should be more resilient to the stay at home economy.
I'll be honest - we did not see the economic shutdown from coronavirus coming. Our daily efforts are dedicated toward looking at the fundamentals of specific securities as well as the macro economy. Stock specific fundamentals of the REITs we owned looked strong and the economy also looked strong with healthy GDP growth, impressively low unemployment, wage gains for blue-collar workers and high consumer sentiment. Perhaps one could have looked at contagiousness of coronavirus and seen the future, but we thought it was going to be like the other outbreaks (H1N1, SARS, EBOLA) where there was some health tragedy, but none of these were really financial events. We did not anticipate the first-ever government-imposed shutdown of the entire U.S. economy.
For these reasons, 2CHYP, our high yield REIT portfolio, was fully invested going into the coronavirus crash. We got hit fairly hard. I imagine many others have been hit hard as well. Setbacks are a part of investing and we must not let that break our focus. The stock market presents a perpetually changing puzzle and it is our job to figure out how to adapt and position for the current conditions.
Positioning strategy
While there is certainly merit in owning companies that can be profitable through the social distancing environment it is also important to own those that can continue to do well on the other side when the economy goes back to normal (whenever that maybe). We must remain cognizant of valuation even when it feels like it doesn't matter. There are plenty of companies that are well positioned but are becoming crowded trades. Yes, we know that Zoom and Netflix are likely to do well in a stay-at-home economy, but everyone knows that and they are priced for... 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
CORECIVIC 18.06   12.0 1.51 1.76 9.83
MACERICH 33.33   43.9 0.76 3.00 8.91
IRON MOUNTAIN 34.14   28.4 1.20 2.44 7.29
ONE LIBERTY PROPERTIES 27.98   31.1 0.90 1.80 6.61
GLADSTONE COMMERCIAL 23.28   1.0 0.02 1.50 6.56
MEDICAL PROPERTIES TRUST 18.94   7.3 2.61 1.04 5.30
UMH PROPERTIES 13.64   0.0 -1.18 0.72 5.26
STAG INDUSTRIAL 29.50   47.6 0.62 1.43 4.93
APARTMENT INVESTMENT & MANAGEMENT 51.11   8.5 6.03 1.56 3.07
CYRUSONE 74.17   0.0 -0.69 2.00 2.53


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We Need To Talk About Dividend Cuts - They Are A Necessary Evil
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