Consider Equity REITs For Your Next Investment

STAG – STAG Industrial (STAG) invests in warehouse and light industrial spaces.STAG fills a niche in Tier II warehouse space in that is sorely needed by smaller growing retailers and light industrial companies in the US. The eREIT has a conservative process for selecting new buildings for acquisition to ensure expected returns are generated.Like Realty Income, STAG pays a monthly dividend.

IRM – Iron Mountain (IRM) is a unique eREIT owning primarily paper document and digital media storage assets. IRM essentially rents out physical space or digital storage space for documents that must be retained by corporations and government entities .In addition, IRM provides document destruction services for sensitive material. Readers should note that IRM has exhibited strong dividend growth over the last 5 years at 16.8% annually. IRM just completed a major acquisition which should add materially to its revenue and earnings going forward. With economic growth picking up, there will be more demand for IRM’s storage and document destruction services.

CLDT – Chatham Lodging Trust (CLDT) is a hotel eREIT specializing in second tier lodging properties (e.g.Hampton Inn and Embassy Suites).CLDT has a number of their hotel properties located near shale oil production facilities. With increased general economic activity and increased shale oil production, CLDT should experience strong growth in occupancy, revenue, and earnings over the next two years.

Readers will note that I have no traditional retail shopping center or mall eREITs listed in the table above .Despite the high dividend yields, I believe the continuing risk from changing shopping trends and increased e-Commerce will continue to depress traditional retail shopping center eREIT revenue and earnings.

In Summary

I believe the current downward pressure on eREIT market valuations due to rising interest rate jitters is short term (1 -2 quarters). This provides an opportunity to pick up solid eREIT companies at much lower prices than were available just 3 months ago.

Many equity REITs will perform well during this period of slowly rising rates. While not yet widely known, the recently passed tax reform legislation makes eREIT dividend distributions more valuable to investors via the new pass-through income provision exempting 20% of REIT ordinary dividends.

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Disclosure: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities.

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