Today I want to finish looking at some interesting securities that are trading below asset value and offer solid dividend yields. These companies must have F-scores of 5 or more, which signifies that they are seeing improvements in their fundamentals and financials.
As discussed Wednesday, it is getting harder than ever to find decent income-producing investments given continued low interest rates and the five-year climb in stock prices -- and traditional income investors are going to have to change their mindsets somewhat. I think using this approach can provide you with the income you need, but you will really have to take a long view of the world and ignore much of the week-to-week and month-to-month market movements. If you can do that, these companies should keep you cashing dividend checks for a long time to come.
That said, I would use F-score changes to manage the portfolio and sell those that have dropped below 5. Otherwise, just ride out the inevitable market dips and surges as much as possible.
Campus Crest Communities (CCG) is a real estate investment trust that owns student housing properties in the U.S. under the Grove and Copper Beech brand names. The company has fallen short of the always highly accurate Wall Street estimates for several quarters in a row, and the stock is off more than 30% over the last year. Since coming public back in 2010, the company has grown from 13 communities with 13,580 beds for college students to 80 properties with more than 43,000 beds.
The stock currently trades at 82% of book value and pays a dividend yield of 7.6%. The F-score is 6, so in spite of Wall Street's dissatisfaction with the company, operating conditions and financials have actually improved year over year. The campus-housing business is one of the better segments of the multi-family housing market, and I get the sense management knows what it is doing when I review the filings and presentations. They certainly seem to believe in the future of the firm: Three insiders, including CEO Ted Rollins and chief financial officer Donnie Bobbitt, have been buyers of the stock in the past month.
Arbor Realty (ABR) has been a fantastic holding for since 2009, and you can still buy the stock at the current price for income portfolios. This REIT invests in a portfolio of multi-family and commercial real estate-related assets, mainly consisting of bridge loans, mezzanine loans, junior participating interests in first-mortgage loans and preferred and direct equity.
The potential bonus with Arbor is that the firm could do very well if interest rates rise on U.S. Treasuries, as 70% of its portfolio is of variable rate and would see an increase in payouts as those rates rise. The total loan portfolio is 1.7 billion and they have just five non-performing loans with a carrying value of approximately $10.7 million.
The shares trade at a slight discount to stated book value but, according to CEO Paul Elenio, the real value of the shares is a bit higher. He told investors on a recent conference call that, when you add back deferred gains and temporary losses on swaps, adjusted book value per common share was $9.22. As for the dividend, the shares yield 7.46% -- and the F-score is 6. I like this income-producing REIT and plan to hold it for a long time.
Two of the stocks on the list, meanwhile, are names that I have discussed in the past and still like for income investors. Summit Hotel Properties (INN) has 90 hotels with a total of 11,353 guestrooms located in 22 states. The shares trade at 95% of book value and currently yield at 4.75% at the current share price. The current F-score is 6. Summit would be an excellent addition to an income portfolio, and it has the potential for both solid dividend growth and price appreciation as the hotel markets continue to improve.
Aircastle (AYR) owns a fleet of owned 162 aircraft that are leased to airlines around the world. The company leases to 64 customers located in 37 countries, and the average lease still has five years remaining. The stock trades at 85% of book value and yields at 4.12% at the current price. The F-score is currently 6. I like the company and the business, and I think the stock can provide decent dividend income and solid total returns.