Who's Chasing Yield? 2 REITs Yielding 12%+

seekingalpha04-29

It’s critical to examine the “margin of safety” with the dividend, to make sure that these picks don’t turn into a so-called “sucker yield”.In general, long-term investors should consider REITs with ...

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2 REITs Yielding 12%+\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-04-29 19:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4687149-who-chasing-yield-2-reits><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>It’s critical to examine the “margin of safety” with the dividend, to make sure that these picks don’t turn into a so-called “sucker yield”.In general, long-term investors should consider REITs with ...</p>\n\n<a href=\"https://seekingalpha.com/article/4687149-who-chasing-yield-2-reits\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"CFA.SI","symbol_name":"NikkoAM-STC Asia REIT","start_time":0,"source_url":"https://seekingalpha.com/article/4687149-who-chasing-yield-2-reits","article_id":"2431831069","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1083855824/image_1083855824.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2431831069","pubTimestamp":1714388400,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"It’s critical to examine the “margin of safety” with the dividend, to make sure that these picks don’t turn into a so-called “sucker yield”.In general, long-term investors should consider REITs with dividends that are not just safe but also have good growth prospects.Is the thrill of victory worth the agony of defeat?Can a high-yield stock also be a SWAN?In general, long-term investors should consider REITs with dividends that are not just safe, but also have good growth prospects. Which means that a REIT that yields 10% almost always is perceived as very low growth, or even worse, a candidate for a potential dividend cut. We’ve seen that story play out many times within the REIT sector…","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"CFA.SI":"NikkoAM-STC Asia REIT","533.SI":"ABR","BK4171":"工业房地产投资信托","KREF":"KKR Real Estate Finance Trust Inc.","MPW":"Medical Properties Trust","BK4104":"贸易公司与经销商","ABR":"阿伯房地产信托","SACH":"Sachem Capital Corp.","GOOD.AU":"Janus Henderson Sustainable Credit Active ETF Managed Fund","BK4224":"工业房地产信托","LADR":"Ladder Capital Corp","BK4225":"医疗保健房地产信托","BK4160":"多样化房地产投资信托v","CFA":"VictoryShares US 500 Volatility Wtd ETF","BK4567":"ESG概念","BK4585":"ETF&股票定投概念","BK4203":"医疗保健房地产投资信托","BK6509":"食品和饮料股","BK6000":"餐馆","HR":"医疗保健房地产信托","ABR.AU":"American Pacific Borate Lithium","NLCP":"NewLake Capital Partners, Inc.","BK4535":"淡马锡持仓","FAST":"快扣","BK7504":"锂钴概念","BK4588":"碎股","GOOD":"格拉德斯通商业","MPW.AU":"MSL Solutions","BK4110":"抵押房地产投资信托","BK7095":"多种金属与采矿"},"translate_title":"谁在追产量？2房地产投资信讬收益率12%+","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"SACH":1,"CFA.SI":1,"GOOD":1,"GOOD.AU":1,"HR":1,"KREF":1,"LADR":1,"MPW":1,"MPW.AU":1,"NLCP":1,"ABR":1,"US10Y.BOND":1,"US12M.BOND":1,"US2Y.BOND":1,"US30Y.BOND":1,"US3Y.BOND":1,"US5Y.BOND":1,"US6M.BOND":1,"US7Y.BOND":1,"CFA":1,"ABR.AU":1,"FAST":0.9,"533.SI":0.9,"US912797HH31.BOND":0.6,"US912797HG57.BOND":0.6,"US912797HE00.BOND":0.6,"US912797GW17.BOND":0.6,"US912797GL51.BOND":0.6,"US912797GK78.BOND":0.6,"US912797GB79.BOND":0.6,"US912797FS14.BOND":0.6,"US912797FH58.BOND":0.6},"content_text":"It’s critical to examine the “margin of safety” with the dividend, to make sure that these picks don’t turn into a so-called “sucker yield”.In general, long-term investors should consider REITs with dividends that are not just safe but also have good growth prospects.Is the thrill of victory worth the agony of defeat?   Thomas Barwick A few days ago, I wrote an article titled “3 REITs That Yield 8%+” in which I explained that “I get paid handsomely to hold these high-yield REITs, even while I wait for their shares to recover.” My three 8%+ picks in that article included these three REITs:  NewLake Capital Partners (OTCQX:NLCP) yielding 8.9%. Healthcare Realty Trust (HR) yielding 8.6%. Ladder Capital (LADR) yielding 8.8%.  For many investors, an 8% yield can be attractive, especially if there’s a margin of safety in the share price which could lead to outsize total return prospects. However, it’s critical to also examine the “margin of safety” with the dividend, to make sure that these picks don’t turn into a so-called “sucker yield.”   REITs for Dummies Interestingly enough, the term SWAN (stands for sleep well at night) rests just below the “Sucker Yield” term in my book. That begs the question… Can a high-yield stock also be a SWAN? In general, long-term investors should consider REITs with dividends that are not just safe, but also have good growth prospects. Which means that a REIT that yields 10% almost always is perceived as very low growth, or even worse, a candidate for a potential dividend cut. We’ve seen that story play out many times within the REIT sector… Who owns or has owned…  Washington Prime CBL Properties PREIT Medical Properties Trust (MPW) Gladstone Commercial (GOOD) KKR Real Estate (KREF)  Just to name a few. Someone asked me recently what I thought about high-yield stocks, and I explained:   Seeking Alpha Simply put, it really boils down to “rick tolerance” and it’s important for every investor to develop a blueprint with his or her personal tolerance levels. In general, I consider most stocks that yield 10% speculative, simply because they offer little or no growth. In my view, what makes REITs so attractive compared is their significant capital appreciation potential and steadily increasing dividends. Nonetheless, I recognize that there are certain investors who are willing to “roll the dice” and chase yield. So, today I’m serving up 2 high yielding REITs – one that we consider is a sucker yield and one that we’re buying. Sachem Capital (SACH): Yielding 13.8% SACH is a mortgage REIT (mREIT) that focuses on loans to borrowers in multiple asset classes. The company targets larger-value projects with financially stable and experienced sponsors. As you can see below, most loans are on the East Coast, and the company has been expanding its footprint into Florida and the Carolinas.   SACH IR SACH targets LTV (loan-to-value) ratios of 70% or below, and the company insists on personal guarantees. SACH’s management team has over 50 years of collective lending and asset management experience and all loans approved by the loan committee. As viewed below, SACH has around 50% exposure in the residential sector:   SACH IR SACH has grown its book of business considerably over the last few years, from under $100 million in assets in 2016 to over $600 million today. As of Q4-23, the company has over $625 million in assets (up 10.6% year-over-year) that includes $50.4 million of cash and investment securities.   SACH IR Also, as of Q4-23, the company had $377.7 million in total debt outstanding and available liquidity of approximately $36.1 million in credit facilities. At the end of Q4-23, SACH had 311 loans with a total balance of $499.2 million, with a weighted average interest rate of 11.4% (not inclusive of fees earned). As previously referenced, the portfolio is spread across 15 states with a focus on Southeastern growth markets and includes a variety of property types, including multifamily, single family, and other commercial real estate assets (only 12.1% of investments are in the office sector). At Q4-23, SACH had loans with a principal balance of approximately $84.6 million in non-accrual status, which includes 56 loans in pending foreclosure, representing approximately $68.5 million of outstanding principal balance, including the accrued but unpaid interest and borrower charges. Keep in mind that while SACH has higher foreclosures in process (16 in December 2021, 40 in December 2022, and 56 in December 2023) it has been able to successfully move its troubled loans off its books before taking possession. As the CEO pointed out on the latest earnings call, “So we have attorneys’ in-house working on this. In many cases, our loans are purchased during the foreclosure by distressed buyers, and we collect most of our money. As you can see by the REO and gains and losses on our real estate in the P&L, there's no real problems there.” In Q4-23, SACH grew revenue approximately 25.5% to $65.6 million, compared to $52.3 million in 2022. During the year, the company incurred ~$6.4 million in non-cash impairments, 70% of which was related to 2 office loans. Net income attributable to common shareholders for 2023 was approximately $12.1 million and EPS was $0.27 compared to $0.46 per share for 2022 (due to increased G&A, depreciation of Sachem's office building, and $6.4 million provision for loan losses). That means that the dividend is not safe, with a payout ratio of 162%.   FAST Graphs Meanwhile, analysts forecast EPS of $.38 in 2024, which does not cover the current distribution of $.44 ($.11 per quarter). In Q1-24 we expect more foreclosures which could lead to more volatility. Also, SACH has a history of dividend cuts, as shown below:   Seeking Alpha We recommend avoiding this small cap mREIT as we anticipate a dividend cut in the foreseeable future. SACH remains on our dividend cut watch list. Arbor Realty Trust (ABR): Yielding 13.1% ABR is an mREIT focused on lending to the multifamily sector. The company has a diverse income-oriented platform that generates strong earnings in all cycles. The company has 3 primary business platforms:  Balance sheet loan origination - strong risk-adjusted returns. GSE/Agency loan origination - capital light; significant earnings and cash flows with high barriers to entry. Focus on small balance loans ($1M-$9M) with an average size of ~$8M. Servicing - generates significant prepayment protected annual revenue with 9-year w/a remaining life. 100% focused on multifamily.  ABR manages a multibillion-dollar servicing portfolio, specializing in government-sponsored enterprise products (leading Fannie Mae DUS lender and Freddie Mac Optigo Seller/Servicer). The product platform also includes CMBS, bridge, mezzanine, and preferred equity loans.   ABR IR ABR has been active in the Agency Business for ~20 years, and the company has been a Top 10 Fannie Mae DUS lender for 17 years in a row (#6 in 2023). ABR’s Agency Business generates over 40% of net revenues, which is unique to the platform. ABR continues to gain market share by converting its balance sheet loans into agency products. As ABR’s CEO, Ivan Kauffman, pointed out, “We have a large pipeline, setting us up for what we believe will be another very solid year in agency originations for 2024. And again, as Agency Business offers a premium value as it requires limited capital and generates significant long-dated, predictable income stream and produces significant annual cash flow.” In Q4-23, ABR generated distributable earnings of $104 million or $0.51 per share and $0.54 per share (excluding a $7 million one-time realized loss in an office property). These results translated into industry high ROEs of approximately 17% for Q4-23 and 18% for 2023. Importantly, EPS was $1.75 per share in 2023 which covered the dividend (despite booking approximately $90 million of reserves for potential future losses).   FAST Graphs A total of 6 analysts forecast (consensus) EPS of $1.70 in 2024, which translates into a payout ratio of 101%. Here’s a look at the payout ratio for the company in previous quarters:   ABR IR So, as you can see, the risk of a dividend cut is elevated, which of course is why shares now yield 13.1%. However, 5 analysts (consensus) forecast growth of 9% in 2025, which puts the dividend on safer ground.   FAST Graphs We still consider ABR speculative given the elevated risks (so we limit exposure to around 2% of our REIT exposure) and our forecast suggests shares could return 15% to 20% annually, which means there’s upside to collecting the 13% yield plus price appreciation.   FAST Graphs In Closing I know you’ve probably heard me saying this before, Is the thrill of victory worth the agony of defeat? I always ask myself this question before I buy a stock, real estate, car, or practically any asset. It’s important to understand your own tolerance for risk, as Howard Marks said, “Managing risk is what separates the best from the rest.”  Now, who’s chasing yield?","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2431831069"}