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REIT Preferreds: Higher-Yield Without Excess Risk

Published Tue, 02 Jun 2020 13:00:00 -0400 on Seeking Alpha

REIT preferred stocks were one of the few places to hide within the high-yield real estate segment amid the violent volatility that rocked REITs during the depths of the pandemic.
Exhibiting fixed-income-like investment characteristics, among REITs that offer preferred shares, the performance of these securities has been an average of 17.4% higher in 2020 than their comparable common shares.
Excluding the handful of troubled retail and lodging REITs that have suspended their preferred distributions, dividend yields currently average around 7.0% compared to the 4.7% yield on REIT common stock.
Total returns of REIT preferreds have lagged the REIT common stock index, but REIT preferreds have exhibited significantly lower volatility, translated into risk-return ratios roughly on-par with REIT common shares.
We introduce our all-new REIT Preferred and Bond Tracker and highlight a handful of our favorite preferred issues. We also take a look at several ETFs and CEFs that focus on REIT preferreds.
REIT Preferreds & Bonds
We're excited to officially expand coverage to REIT preferred and exchange-listed bond securities. In our all-new REIT Preferred & Bond Tracker, we track all 172 REIT preferred securities and "baby-bonds" from 78 unique REIT issuers. Preferred stocks and "baby-bonds" generally offer more downside protection, but in exchange, these securities offer relatively limited upside potential outside of the limited number of “participating” preferred offerings.

(Hoya Capital Real Estate, Co-Produced with Brad Thomas)
REIT Preferred & Bond Overview
Preferred stocks are a type of hybrid security - straddling the line between common equity and bond - that entitles a shareholder to a fixed dividend, whose payment takes priority over that of common stock shareholders. A somewhat esoteric segment of the REIT investment landscape - but an under-the-radar favorite among yield-focused REIT investors - the usage of preferred equity... 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
AG MORTGAGE INVESTMENT TRUST 17.47   6.1 2.87 1.90 10.89
HERSHA HOSPITALITY TRUST 15.01   0.0 -0.54 1.12 7.42
NUVEEN REAL ESTATE INCOME FUND 10.71   0.0 0.00 0.00 6.99
DIGITAL REALTY 126.53   116.1 1.09 4.32 3.38
EQUITY LIFESTYLE PROPERTIES 132.21   44.7 2.96 2.45 1.90


Older articles featuring Cbl & Associates Properties (CBL):
CBL Properties Declares Third Quarter Common Stock Dividend
CBL Properties Establishes Regular Quarterly Common Stock Dividend
6 Reasons To Ditch High Yield REITs
Rents Paid, Dividends Raised: REIT Earnings Recap
REIT Earnings Halftime Report: Dividend Cuts, No More
PTY: Safest +9% Yield Cash Machine, Paid Monthly
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