If I Was Retiring In 10-20 Years With 10 REITs - Part 2

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Younger investors can afford riskier REITs, but retirees need dependable income sources. Avoid mortgage and lodging REITs due to their volatility and economic sensitivity.Broadstone Net Lease offers a...

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Avoid mortgage and lodging REITs due to their volatility and economic sensitivity.Broadstone Net Lease offers a...</p>\n\n<a href=\"https://seekingalpha.com/article/4720540-if-i-was-retiring-in-10-20-years-with-10-reits-part-2\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>If I Was Retiring In 10-20 Years With 10 REITs - Part 2</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nIf I Was Retiring In 10-20 Years With 10 REITs - Part 2\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-09-12 19:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4720540-if-i-was-retiring-in-10-20-years-with-10-reits-part-2><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Younger investors can afford riskier REITs, but retirees need dependable income sources. Avoid mortgage and lodging REITs due to their volatility and economic sensitivity.Broadstone Net Lease offers a...</p>\n\n<a href=\"https://seekingalpha.com/article/4720540-if-i-was-retiring-in-10-20-years-with-10-reits-part-2\">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":"STAG","symbol_name":"STAG Industrial","start_time":0,"source_url":"https://seekingalpha.com/article/4720540-if-i-was-retiring-in-10-20-years-with-10-reits-part-2","article_id":"2466927677","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1338456783/image_1338456783.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2466927677","pubTimestamp":1726138800,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Younger investors can afford riskier REITs, but retirees need dependable income sources. 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Avoid mortgage and lodging REITs due to their volatility and economic sensitivity.Broadstone Net Lease offers a strong combination of safety, quality, yield, and value with a 6.34% dividend yield and investment-grade credit rating.CTO Realty Growth is transitioning to a shopping center REIT, offering a 7.79% dividend yield and trading at a discounted AFFO multiple.STAG Industrial provides industrial exposure with a 3.73% dividend yield, focusing on single-tenant and multi-tenant properties in middle markets.   The Good Brigade Earlier this week, I began my three-part answer to a subscriber who wanted to know which real estate investment trusts (REITs) someone should consider if they were 10–20 years out from retirement. It’s a great question because different stages of life can warrant different investment considerations for different people. For instance, I never recommend buying mortgage REITs to retirees. Or lodging REITs, for that matter. These two categories are too risky, with the first dealing exclusively with debt – other’s debt, but debt nonetheless – and the second being too attached to the economy. If the economy is booming, lodging REITs are too. If it’s not, those businesses are out of luck, since consumers cut back on unnecessary expenditures during tough times. Retirees need much more dependable sources of income than that. Whereas younger investors with steady jobs can afford to be less cautious. Now, I do think that mentality can be taken too far. For instance, Yahoo Finance was running an article for at least a week titled, “Why Millennials and Gen Z Are Too Young to Be Loading Up on Bonds.” I actually agree with the title since “loading up” means taking on a lot. And yes, there’s little reason for younger investors to do any such thing. But that’s not what the article actually means. It means they shouldn’t hold bonds at all. Bonds Aren’t Perfect, but Neither Are Stocks Here’s how the Yahoo article begins:  “Wall Street has long preached the virtues of holding bonds in a balanced investment portfolio. “This gospel says investors should steer 60% of their investments into stocks and 40% to bonds to enjoy the benefits of diversification, with uncorrelated returns helping protect investors through the market’s ups and downs. “But according to Trent Smalley, a Chartered Market Technician and portfolio manager at PSPM, that advice may not be as universal as it seems – especially for younger investors.”  Smalley doesn’t think they should bother at all since “bonds are there to reduce the volatility of a portfolio.” And “if you’re young enough, really none of that matters.” The article itself then goes on to point out how:  Badly bonds did in 2022 They’re not as profitable “during periods of high inflation and rising interest rates” The S&P 500 has recorded a compound annual growth rate (CAGR) of 7.8% in the past 30 years, whereas bonds have only returned 3.3%.  But nobody is arguing that bonds perform better than stocks over the long run. Because everyone knows that they don’t. They’re simply there for tough times. And since we never know when tough times are going to hit – or how we will react to them – it’s best to keep some bonds on the side. Maybe not 40%. Perhaps not even 30%. But the idea that young people don’t need any at all is beyond foolish. Next they’ll be telling us that millennials and Gen Zers should be loaded up on nothing but Big Tech since that’s where the lion’s share of S&P profits have been in the last few years. REITs for Anyone Who Wants to Retire Someday My Seeking Alpha Colleague Leo Nelissen wrote a much more insightful take on investing the other day. In his article, “Why Everyone Should Be a Dividend Investor,” he wrote about the 90/90/90 rule, which essentially “says that 90% of new traders lose 90% of their starting capital within the first 90 days.” This “explains perfectly why Wall Street makes so much money, as most traders are simply providers of liquidity – nothing more, nothing less.” He then quotes a seven-year-old blog post from “tradergurl” that still stands out today: “In order to make money in the markets, you need liquidity (stocks being bought and sold). The ‘dumb money’ provides the liquidity that the ‘smart money’ uses to get in and out of trades. Trading is a zero-sum game. Every single penny you make is because some other poor schmuck lost it. For every buyer, there’s a seller and vice-versa (in an efficient liquid market.” Those last few lines can be debated, I know. But the larger premise remains true that the stock market can go up all it wants. That doesn’t mean average investors necessarily benefit from it. It takes a careful analysis of risks and rewards, personal situations, and goals to get anywhere good. And that’s why I’m more than happy to do series like this one to help readers better navigate their options… always reminding everyone that safety matters at every age and stage of your life. That means I might make some of the same recommendations for investors who are 10–20 years out from retirement than I would for those just starting out in the markets. Or those who are in retirement. There will be differences too, yes. But I believe you always need a foundation of steady, stable, dividend-paying stocks to build on regardless. To quote Leo again, “I believe long-term dividend investing is one of the best ways to build long-term wealth ever ‘invented.’” And the sooner you get started in on that mission, the more time those dividends have to grow. Broadstone Net Lease (BNL) BNL is an internally managed real estate investment trust that invests in single-tenant commercial properties leased on a long-term, net lease basis. The company has a market cap of approximately $3.6 billion and a 38.5 million SF portfolio comprising 777 properties located in 44 states and 4 Canadian provinces. Broadstone’s portfolio is diversified across multiple property types but leans heavily towards industrial properties. The company owns multiple types of industrial properties including distribution & warehouse, manufacturing, food processing, and cold storage. In total, industrial properties make up 54.6% of BNL’s portfolio. In addition to industrial properties, the company owns real estate used in the restaurant industry, the healthcare industry, as well as retail and office properties. BNL’s portfolio generates $385.5 million of annualized base rent (“ABR”) and has 207 tenants operating in 53 industries. Additionally, on average, the portfolio has 2.0% annual escalations, a weighted average lease term (“WALT”) of 10.4 years, and its portfolio was 99.3% leased with only 3 out of its 777 properties vacant as of the end of 2Q-2024.   BNL - IR The company internalized its management and went public in 2020 which was likely overshadowed to some extent by the pandemic. While BNL has only been a publicly traded company since 2020, it was formed in 2007 and constructed its portfolio during, and the years directly after, the Great Recession. I, personally, think this is one of the best combinations of safety, quality, yield, and value available in the REIT universe today. Many REITs have had a nice run over the last several months, including BNL, however the company is still trading at an FFO multiple of 12.29x and pays a 6.34% dividend yield. All this while the company has a market cap of $3.6 billion and is investment-grade with a credit rating of BBB by S&P Global. Not to mention its portfolio is over half industrial. It’s tough to find an investment-grade net lease REIT trading at 12 times FFO and paying a yield over 6% right now as the environment has improved dramatically for REITs over the past several months and price appreciation has pushed many REITs into less attractive territory. Here is how BNL stacks up against some of its net lease peers:   Seeking Alpha (compiled by iREIT®) There are arguably higher-quality REITs on the list above, but the price and yield trade-off is steep. BNL might not be the highest-quality net lease REIT, but it appears to me as one of the best investments currently in the net lease space. Don’t get me wrong, BNL has high-quality properties and a solid balance sheet, it just may not be as high-quality as some of the more established net lease REITs. Its closest competitor looks like WP Carey, which is a little pricier and has a slightly lower yield, but you get a larger market cap and higher credit rating for the trade-off. On the flip side, Agree Realty is arguably one of the highest quality net lease REITs trading on the market. However, it is trading at an FFO multiple of 18.65x and currently pays a yield under 4 percent. The chart below shows the history of BNL from its inception in 2007 to the present.   BNL - IR The company has strong credit metrics as well with a pro forma net debt to adjusted EBITDAre of 4.9x and a fixed charge coverage ratio of 4.7x. Plus BNL has minimal debt maturities until 2026, a weighted average term to maturity of 4.1 years, and $939.0 million of corporate liquidity as of the end of the second quarter.   BNL - IR One issue that may be holding the stock price down is BNL’s projected future growth. The company grew AFFO per share by 7% in 2022, but then only grew AFFO per share by 1% in 2023 and is expected to grow AFFO per share by 1% in 2024. While its recent growth is nothing to write home about, the company is expected to grow AFFO per share by 4% in 2025 and then by 3% the following year. Assuming a long-term growth rate of 3%, at its current price and with no multiple expansion, BNL offers an economic return in the high-single digits given its 6.34% dividend yield + 3% assumed AFFO growth. I am more than happy to receive an almost 10% return for a company with built-in contractual revenues, an investment-grade balance sheet, a safe dividend with a conservative payout ratio, and moderate earnings growth.   FAST Graphs (compiled by iREIT®) Currently, the stock is trading at a P/AFFO of 12.85x, compared to its normal AFFO multiple of 14.25x. The company pays a 6.34% dividend yield that is well covered with a 2023 AFFO payout ratio of 79.43%, and an expected 2024 AFFO payout ratio of 81.12%. We rate Broadstone Net Lease a Buy.   FAST Graphs CTO Realty Growth (CTO) CTO is a retail REIT with an interesting history. Originally, the company was called Consolidated-Tomoka Land Co before its name was changed to CTO Realty Growth in May 2020. The company can trace its history back to 1902 when it was initially founded. Consolidated-Tomoka was based near Dayton Beach, Florida and was originally engaged in selling timberland and mineral rights. At one time the company was one of the largest landowners in Florida and was reported to own 1.8 million acres at its peak. In recent decades, the company has evolved by selling raw land and purchasing improved property, namely, income-producing commercial properties used in retail industries. By the end of 2018, the company owned 45 single-tenant and 7 multi-tenant retail properties totaling 2.3 million SF. In 2019, the company completed a spin-off of its single-tenant assets, which seeded Alpine Income’s (PINE) net lease portfolio. CTO kept the multi-tenant properties and agreed to externally manage PINE. In 2020, the company changed its name to CTO Realty Growth to better reflect its current business of owning & leasing retail properties in business-friendly, high-growth states, primarily located in the sunbelt region of the U.S.   CTO - IR CTO is now a small-cap shopping center REIT specializing in open-air centers in fast-growing, business friendly markets in the Southeast and Southwest parts of the country. The company has a market cap of approximately $448.1 million, and on a pro forma basis, a 4.6 million SF portfolio comprising 22 properties with an occupancy rate of roughly 93%. As a percentage of its ABR, multi-tenant properties represent 94% of its portfolio, retail & mixed-use properties represent 96%, and 31% of its portfolio ABR comes from grocery-anchored properties. In August, the company closed 3 acquisitions that expanded its presence in Tampa and Charlotte and increased its grocery-anchored property count. All three acquisitions are multi-tenant retail properties that combined total 893,284 SF and on average are 94.2% occupied. All three properties are anchored by major retailers including Ross, Burlington, Nordstrom Rack, Sprouts, and PetSmart and two of the properties are in Florida while the other is in North Carolina. On a pro forma basis, after the company’s recent acquisitions, CTO’s largest state is Georgia. There, it has 4 properties that make up 31% of its portfolio ABR. This is followed by Florida with 10 properties that make up 19%, and Texas with 3 properties that make up 16% of the company’s portfolio ABR.   CTO - IR While a higher level of risk is generally associated with small cap REITs, CTO has a pretty solid balance sheet with well-staggered debt maturities. The company has a net debt to total enterprise value of approximately 48%, a net debt to pro forma EBITDA of 7.5x, and an EBITDA to interest expense ratio of 3.01x. Plus, the company has no debt maturities until 2025 and reported total liquidity of $154.8 million at the end of the second quarter.   CTO - IR In 2023, the company increased AFFO per share by 4.37% and analysts expect AFFO per share to grow by 3.66% in 2024 and then increase by 3.03% the following year. CTO pays a high yield that is well covered, with a 2023 AFFO payout ratio of 79.58% and an expected 2024 AFFO payout ratio of 76.77%.   FAST Graphs (compiled by iREIT®) The stock currently pays a 7.79% dividend yield and trades at a P/AFFO of 9.97x, compared to its average AFFO multiple of 10.15x. While its current AFFO multiple is only a slight discount to its average, I believe multiple expansion is due as the company has been transitioning from a diversified REIT to a shopping center REIT. While the company is not yet a pure-play shopping center REIT and still holds 1 office property and 4 mixed-use properties, it appears to be heading in that direction. For comparison’s sake, I’ve listed some shopping center REITs and their respective AFFO multiples below:  Regency Centers (REG) – AFFO multiple: 21.49x Kimco Realty (KIM) – AFFO multiple: 19.18x Brixmor Property (BRX) – AFFO multiple: 18.65x Kite Realty (KRG) – AFFO multiple: 18.37x InvenTrust (IVT) – AFFO multiple: 20.83x Whitestone (WSR) – AFFO multiple: 17.27x  Now, to be clear, I’m not suggesting that CTO should trade at an AFFO multiple in line with the shopping center REITs above. Most of the REITs above are much larger, are pure-play shopping center REITs, and have an investment-grade credit rating. However, I think the disparity is too large when CTO trades at an AFFO multiple of 9.97x and the majority of its portfolio consists of multi-tenant retail and mixed-use properties located in attractive sunbelt markets. We rate CTO Realty Growth a Buy.   FAST Graphs STAG Industrial (STAG) STAG is a REIT that specializes in the acquisition and management of industrial properties located across multiple markets throughout the United States. The company has a market cap of approximately $7.2 billion and a 114.1 million SF portfolio comprising 573 properties across 41 states. STAG has a couple of distinguishing characteristics that help define its investment strategy. For one, the company has for years focused primarily on single-tenant industrial properties, similar to a net lease REIT that holds industrial properties. While the majority of its portfolio is still single-tenant, the company has a growing number of multi-tenant industrial properties. From all indications, it appears that STAG has adjusted its investment strategy to place more emphasis on multi-tenant industrial properties. At the end of 2Q-24, multi-tenant industrial properties made up 26.4% of STAG’s net rentable area (“NRA”). Another aspect of the company’s investment style is that it generally acquires individual properties rather than making large portfolio acquisitions. STAG feels that by acquiring individual properties, it is more cost-effective and allows the company to maintain and control the quality of its portfolio rather than making bulk purchases. Moreover, STAG has a focus on multiple markets, including middle markets that do not receive the same amount of attention from institutional investors as super-primary markets do. STAG invests throughout CBRE-EA Tier 1 & 2 markets rather than just focusing on super-primary markets. The company strategically focuses on middle markets because it typically limits competition for acquisitions to local investors that do not have the same resources and access to capital. Essentially, by focusing on middle markets, STAG can be the “biggest fish in a small pond” so to speak. Recent trends in industrial real estate have seen slowing demand for large logistics facilities being replaced by increased demand for industrial properties used in manufacturing. STAG is well-positioned to take advantage of this dynamic, as many of its properties are in ideal locations for the nearshoring and onshoring of manufacturing. According to the company, roughly one-third of its portfolio is within a 60-mile radius of “Megasite Projects.” These are defined as locations listed on the White House “Investing in America” initiative site, which lists areas where public policy and private investment work in conjunction to stimulate the economy. At the end of 2Q-2024, STAG reported a portfolio occupancy of 97.1% and a weighted average lease term of 4.3 years.   STAG - IR STAG has an investment grade balance sheet with a BBB- credit rating from Fitch and a Baa3 rating from Moody’s. The company has strong debt metrics as well, including a net debt to adjusted EBITDAre of 5.0x, a long-term debt to capital ratio of 45.31%, and a fixed charge coverage ratio of 5.2x. 95.5% of the company’s debt is fixed rate and in total, the debt has a weighted average interest rate of 3.92% and a weighted average term to maturity of 4.7 years. Additionally, STAG has a well-balanced debt maturity schedule with minimal debt maturities in 2024 and reported total liquidity of $902.9 million at the end of the second quarter.   STAG - IR Over the last 10 years, STAG has had an average AFFO growth rate of 4.06%. The company was able to generate positive AFFO growth per share in each year over the past decade, except for 2020, when AFFO per share fell by -3%. Analysts expect AFFO per share to increase by 5.61% in 2024 and then increase by 4.35% and 6.94% in the years 2025 and 2026, respectively. STAG has increased its dividend each year since 2015, albeit at a slow pace. Since 2015 the company has had an average dividend growth rate of 2.08%. I would like to see STAG accelerate its dividend growth. However, it should be noted that the company did not cut or suspend its dividend during the pandemic and has conservatively funded its dividend with a 2023 AFFO payout ratio of 75.0% and an expected 2024 AFFO payout ratio of 71.50%.   FAST Graphs (compiled by iREIT®) STAG is currently trading at a P/AFFO of 19.50x, compared to its average AFFO multiple of 17.10x. While the stock is trading above its historical average, it is priced well below most of its industrial peers. Only Plymouth Industrial (PLYM) has a lower AFFO multiple, and Americold is close at 20.48x. So while STAG is expensive relative to its past trading history, it is cheap compared to the majority of its industrial peers.   FAST Graphs (compiled by iREIT®) STAG is a great way to add industrial exposure without paying the industrial premium. The company pays a 3.73% dividend yield and currently trades at a P/AFFO of 19.50x. We rate STAG Industrial a Buy.   FAST Graphs In Closing In case you missed it, here are our “Part 1” picks:  W. P. Carey (WPC): 5.6% Dividend Yield Brixmor (BRX): 4.0% Dividend Yield Alexandria Real Estate (ARE): 4.3% Dividend Yield.  Here's a recap of the “Part 2” picks:  STAG Industrial: 3.7% Dividend Yield CTO Realty: 7.2% Dividend Yield Broadstone Net Lease: 6.3% Dividend Yield.   In my final series (Part 3) I will be selecting four more REITs to round out the “If I Was Retiring In 10–20 Years With 10 REITs.” I hope that you enjoyed Part 2 and I look forward to your feedback.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":0},"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":"4.29.1","shortVersion":"4.29.1","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/2466927677"}