- (0:30) - Pro’s and Con’s of Real Estate Investment Trusts
- (6:45) - Top Performing REITs: What To Watch
- (20:40) - What Criteria Helps You Find A Good REIT?
- (27:00) - Episode Roundup: OHI, ABR, GEO, IIPR, MAC, LTC, LAND
Welcome to Episode #179 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
In this episode, Tracey is joined by Zacks Account Manager, Nico Yokosawa, to discuss one of the hottest industries of 2019: REITs.
After Nico appeared on a prior episode of the podcast to discuss lottery stocks, it turns out that what he really wanted to discuss was REITs, or Real Estate Investment Trusts.
A REIT allows investors to buy shares in a commercial real estate portfolio. These can be in a lot of different areas such as apartments, hotels, malls, warehouses and assisted living centers.
REITs are required by the IRS to return a minimum of 90% of its taxable income back to shareholders each year. Hence, the reason REITs pay dividends.
Great Performance in 2019
Most investors think of REITs as slow growth names that pay big dividends. You’re not in it to trade it, you’re in it to own for the long haul.
It’s a way to own real estate without having much capital or without having to be a landlord.
But in 2019, the REITs, as an industry, have outperformed.
Year-to-date, REITs have returned 19.6% compared to the S&P 500 (IVV) at 13.2%.
REITs have the sizzle this year.
How Do You Find “Good” REITs to Invest in?
There are 116 REITs in the REIT industry category on Zacks.com. That’s a lot of names to look through. How can investors narrow it?
Start with the industry and then screen for the Zacks Rank, which should get you rising earnings estimates.
Currently, there are only 2 Zacks Rank #1 (Strong Buy) stocks so that’s not really going to get you very far.
Several of Zacks trading portfolios and newsletters will hold REITs as well. If you’re a subscriber, that’s another way to find them.
5 REIT Stock Ideas
1. Omega Healthcare Investors OHI is in skilled nursing and assisted living facilities in the US and the UK. It has paid an annual dividend since 2003. The current yield is 7.6%. Nico owns shares of it in his personal portfolio.
2. Innovative Industrial Properties IIPR is one cannabis company that actually has earnings. This small cap company has sky-high earnings growth and a 2.1% yield. But it doesn’t come cheap, with a forward P/E of 33.
3. Arbor Realty Trust ABR is one of the Zacks Rank #1 (Strong Buy) REITs. It provides loan origination and servicing for multifamily, senior housing, healthcare and other commercial real estate assets. It manages a multi-billion-dollar servicing portfolio. Arbor has a forward P/E of 10.6 and pays a dividend yielding 7.9%.
4. GEO Group GEO is the other Zacks Rank #1 (Strong Buy) REIT. It offers correctional, detention and residential treatment services to government agencies around the globe. It has a market cap of $2.7 billion. Investors will get a dividend yielding 8.7%.
5. Macerich MAC operates in the major retail real estate, including trophy properties such as premium outlet malls. The CEO has been buying shares recently as they have dipped near 52-week lows. The mall is a tough place to be right now. This REIT pays a dividend yielding 7.5%.
REITs can offer you more diversification than you might think.
For instance, if you want to own farmland, there’s a REIT for that.
The same is true for data centers and cell phone towers.
What else do you need to know about REITs?
Tune into this week’s podcast to find out.
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Arbor Realty Trust (ABR) : Free Stock Analysis Report
Macerich Company (The) (MAC) : Free Stock Analysis Report
Innovative Industrial Properties, Inc. (IIPR) : Free Stock Analysis Report
Omega Healthcare Investors, Inc. (OHI) : Free Stock Analysis Report
Geo Group Inc (The) (GEO) : Free Stock Analysis Report
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