Published Thu, 24 Sep 2020 08:35:00 -0400 on Seeking Alpha
Seeking AlphaClosed End FundsGEO Group: 12% Yield With AAA-Rated TenantsSep. 24, 2020 8:35 AM ET|| About: The GEO Group, Inc. (GEO), Includes: CXWby: Rida MorwaRida Morwa High Dividend OpportunitiesThe #1 Service for Income Investors and Retirees, 9-10% dividend yield.SummaryTenant quality is often a driving factor for property and REIT valuations.
This REIT has more than half their income coming from AAA rated tenants.
Despite this, it trades remarkably cheap and has a double-digit yield.
Top-quality tenants, low payout ratio, and a high yield.
Co-produced with Beyond Saving
In the world of REITs, the quality of the tenant often becomes a driving factor in the valuation of the stock. Properties that have very reliable tenants tend to be very highly valued. Properties with tenants that are distressed or otherwise perceived as being unreliable will sell for less.
While real estate has an intrinsic value, the value of the land and the physical building, for investors the largest portion of value is often apportioned to the lease. A long-term lease with a reliable tenant is much more valuable than a lease to a questionable tenant. That's why the same warehouse leased to Amazon (AMZN) is going to sell for a much higher price than a warehouse with an identical lease to a small company with no credit rating.
When listing the most reliable tenants in the world, Uncle Sam is likely near the top of the list. The US federal government can be relied on to pay their bills, and if they don't, then we all have much larger things to worry about.
Also the government of Australia is one that a lot of people might not think of, but also is a great customer with a AAA credit rating.
It's hard to imagine two better, more stable, more reliable customers to have a contract with. There's a REIT today that receives 57% of its revenue from the US federal government and the government of Australia. It must be trading at a high price and have a very low yield... Read more
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