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Seeking REIT Yields

Published Mon, 08 Jun 2020 08:25:00 -0400 on Seeking Alpha

Cap-weighted REIT yields are low in the present era, but this may be misleading as average yields are higher.
We discuss the distribution of yields in a few REIT sectors.
Buying a higher yield ordinarily means accepting both smaller market capitalization and higher debt ratio.
The decrease in yield since 2009 arises from the decrease in average REIT debt ratio.
We prefer to buy undervalued REITs whose higher yield is only temporary.
Co-produced with R. Paul Drake for High Yield Landlord
Some authors will tell you to avoid any REIT with a yield above 4%. Others will point you to REITs with yields above 10%.
Yet many REITs yield between 4% and 10%. And at the moment a lot of them are paying 0%, because they have cut or suspended their dividends.
How should one make sense of this? What's really going on with REIT yields?
Here we share the explorations of this subject by one of our authors, R. Paul Drake, in his words.
This article originated from paging through the March 2020 edition of REITWatch, produced by NAREIT. I encountered the plot shown in Figure 1. The plot concerns equity REITs, which is what is meant by the word REIT throughout this article.

Figure 1. Annual returns of all equity REITs since 1972. The light blue bars show the dividend yield in each year. Source: NAREIT.
Three timeframes are covered by this plot. These are the pre-modern REIT era, before the early 1990s, the early modern era from about 1994 through 2009, and the current REIT era during the economic expansion from 2010 through 2019.
The long-term average yield has been 7.5%. This was about the average from1992 through 2007. In contrast, during the current era the yield has never reached the long-term average.
Looking at the numbers, after 2009 the overall REIT dividend yield has never reached 5%. On first glance, this seemed very strange. I'm familiar with many REITs whose yields are above 5%. You probably are too.

Figure 2. Total and... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
EPR PROPERTIES 77.15   22.8 3.38 4.50 5.84
PHYSICIANS REALTY TRUST 17.27   61.7 0.28 0.92 5.36
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
MONMOUTH REAL ESTATE INVESTMENT 14.31   0.0 -0.03 0.68 4.86
VENTAS 71.17   51.6 1.38 3.17 4.41
NATIONAL RETAIL PROPERTIES 54.39   35.8 1.52 2.06 3.81
REALTY INCOME 74.49   56.9 1.31 2.72 3.69
FEDERAL REALTY INVESTMENT TRUST 135.76   40.4 3.36 4.20 3.00
PROLOGIS 84.04   31.2 2.69 2.12 2.55
AMERICAN TOWER 218.85   66.3 3.30 3.68 1.70


Older articles featuring Epr Properties (EPR):
EPR Properties Declares Quarterly Dividends for Preferred Shareholders
The Retiree's Dividend Portfolio - John's November Update: Income Drops But Account Balances Climb
6 Reasons To Ditch High Yield REITs
EPR Properties Declares Quarterly Dividends for Preferred Shareholders
The Retirees' Dividend Portfolio: John And Jane's November Taxable Account Update
'Tis The Season For REIT Dividends
Net Lease REITs: Rents Paid, Dividends Raised
The Retiree's Dividend Portfolio - John's October Update: Caution For The Market's Optimism
The Retiree's Dividend Portfolio - Jane's October Update: Time To Take Some Gains
Phoenixes Rising: 3 Future High Yielders