3 Popular REITs To Avoid At All Costs In 2020

Fewer tenants mean less cash flow to be distributed to shareholders.

Add in the fact, the company is highly levered, and investors have the added worry about rising rates.

There are better opportunities out there than Global Net.

REITs to Avoid in 2020, No. 2

Looking for the next CBL?

My bet is on Macerich Co. (NYSE: MAC). While this regional mall REIT has lost almost half its value in 2019, there is still $3.7 billion of value to destroy.

Investors looking for yield will be attracted to Macerich's 11% dividend yield, but caution is warranted.

The retail sector remains in a death struggle. Many companies are still failing, leaving vast chunks of mall space empty.

Earnings at Macerich are falling.

Analysts expect the company to make $0.45 per share in 2019 dropping to $0.35 per share in 2020.

That's not a huge drop, but again, it signifies the risk of owning Macerich today.

If 2020 brings more retail bankruptcies, investors could lose much more than the big dividend Macerich pays today.

REITs to Avoid in 2020, No. 1

I'm a big believer in sector rotation. What does well one year may not do so well the next.

It's no secret that apartment REITs were big winners in 2019. Strong economic growth in the United States with low-interest rates resulted in huge demand for apartments.

Rents are higher, and vacancy is low.

No wonder a stock like Independence Realty Trust Inc. (NYSE: IRT) is up some 50% in 2019.

Does a banner year in 2019 continue in 2020?

I wouldn't stick around to find out.

Analysts are expecting a big drop in earnings, with the company estimated to make $0.31 per share in 2019 and only $0.20 per share in 2020.

This despite nearly perfect operating conditions in the rental market.

Any blips in those perfect conditions and investors will be left out in the cold.

The huge run-up in share price has dropped the dividend yield to 5%.

That's not nearly enough to compensate for the potential drop in share price in 2020.

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