6 Attractive REITs for Growth and Income

Historically low interest rates have been an ongoing boon to equities, but have also been a challenge to those seeking steady income. In this environment, many of the investment experts who contribute to MoneyShow.com have turned to real estate investment trusts. Todd Shaver, BullMarket Report Vornado Realty Trust owns properties that are geographically concentrated in New York City. New York City is notoriously a difficult market to crack, creating barriers to entry and providing some protection to Vornado's properties from the competition. The properties are attractive assets to own and include 19 million square feet of Manhattan office space across 35 properties. Vornado also owns the Hotel Pennsylvania (across the street from Penn Station) and 69 Manhattan Retail properties encompassing 2.4 million square feet. Vornado own 10 residential properties totaling 1.5 million square feet; and a third of Alexander's, a REIT that owns seven properties in the metropolitan area, including Bloomberg's Manhattan headquarters. Meanwhile, the company is redeveloping the New York Penn Station assets. These new buildings should have strong leasing characteristics given the good location and capital improvements Vornado is doing. We expect strong occupancy and leasing rates. The REIT also owns other marquee properties outside New York City, including Chicago's theMART, and a 70% interest in the Bank of America Center, located in San Francisco. These have strong characteristics and the latter property is fully occupied. Vornado's properties already have strong occupancy rates. Its 10 properties in the other category have a 93% occupancy rate while its New York (97%), the MART (95%), and San Francisco (100%) assets were even stronger. Third-quarter revenue fell by 14% year over year, to $465 million from $540 million. Income grew sharply, to $335 million from $205 million, due to several property dispositions, including Fifth Avenue/Time Square JV, and 330 Madison Avenue. Plus there were redevelopments, and retail bankruptcies that the company took advantage of. On a same-store basis, rental revenue increased by $4.5 million. Management has been astute operators, selling properties in a hot market. Investors benefited after receiving a nice bonus when Vornado recently paid a special $1.95 dividend due to the profit realized from the sale of certain assets, including Fifth Avenue and Madison Avenue. Most of this, $1.74 per share, is considered a long-term capital gain. Excluding this payout, Vornado's yield is 4%. At the end of the day, the three keys to success in real estate, location, location, and location, will continue to serve Vornado's shareholders well. Tom Hutchinson, Cabot Dividend Investor Crown Castle International is a real estate investment trust that leases cellular technology infrastructure. More specifically, the company leases a portfolio of properties that currently includes 40,000 cell towers, 65,000 small cell towers and 70,000 miles of fiber optic cable primarily to the four largest wireless service providers. It is an unusual REIT that is smack dab in the middle of the 5G revolution. 5G technology is a game changer that the U.S. government has prioritized. In fact, 5G has become the new arms race and the buildout will continue in haste, rain or shine. Crown Castle is one of the leading companies in providing the necessary infrastructure to make the technology possible. I like it better than the other companies in the same business for two reasons: it specializes in small cells and it only operates in the U.S. A 5G signal only travels about half a mile, compared to several miles for earlier generations. That means that small cell towers will be needed all over the place in order to increase the range and relieve congestion. And Crown Castle is the small tower king, providing more than any other company. And because it operates exclusively in the U.S., it won't have international complications screwing up the story. The REIT has produced reliable growth for several years and should continue to thrive. The stock is somewhat expensive at current levels but, given the huge demand and growth in its area, Crown Castle should continue to grow and perform at a high level for several years to come. Tim Plaehn, The Dividend Hunter MGM Growth Properties LLC was spun out in 2016 by MGM Resorts International ; the initial REIT portfolio consisted of 10 MGM run properties, including seven on the Las Vegas strip. MGM Growth Properties has a triple-net master lease agreement with MGM Resorts, which means all the REIT properties are on a single lease, and the gaming company cannot single out one to close or not pay rent. MGP now owns 14 properties, and all are leased to MGM. EBITDA from MGM coverage of the master lease payment is 6.2 times. The lease as a built-in 1.8% rent escalator and MGP will also share profit growth at the casinos. In January 2020, the company announced a joint venture with Blackstone Real Estate to acquire the Las Vegas real estate assets of the MGM Grand and Mandalay Bay for $4.6 billion. The MGP dividend has grown by 30% since the IPO, and the shares yield 5.5%. MGP has a $10.1 billion market cap. In November the share price of MGM Growth Properties dropped from an early in the week high of just over $33 to close the week at $30.81. They have since recovered. The reason for the drop was the sale of 30 million new shares at $31.25 per share. Secondary offerings like this always go out at a discount to the recent share price. MGP raised $540 million with the share offering. Pass through entities like MGM Growth Properties issue new shares to fund future acquisitions. Asset purchases cannot be entirely funded with debt, so companies will go into the stock markets to raise capital. This type of stock issuance is a very good indicator the company will soon be making more acquisitions and continue its history of dividend increases. For growth focused, dividend paying stocks, share price drops due to secondary offerings are a good opportunity to pick up shares on sale. The secondary is also a sign that future growth is coming soon. MGP offers a 5.5% yield with the next dividend payout expected to come in April. Bryan Perry, Cash Machine I view the current virus-related selloff in the travel and leisure sector as a buying opportunity. Thus, I want to add a blue-chip hotel REIT to our portfolio. Host Hotels & Resorts pays an attractive dividend yield and is trading off its recent high by 12%. The shares yield 4.7%. Host Hotels is the largest lodging real estate investment trust and is one of the biggest owners of luxury and upper-upscale hotels. The company currently owns 80 properties in the United States and five properties internationally that, together, total approximately 47,000 rooms. It is the only lodging REIT with an investment-grade credit rating. Some of the 40 iconic properties include Boston Marriott in Copley Place, Fairmont Kea Lani, Maui, Grand Hyatt San Francisco, New York Marriott Marquis, Sheraton Times Square Hotel, The Phoenician Scottsdale, Ritz-Carlton Naples, St. Regis Houston, Westin Seattle and W Hotel Hollywood. The company has been forecast to earn about $1.65 per share from Q4 2019 through Q3 of 2020. Thus, the stock is trading at just 10 times forward earnings. With an annual dividend payout of $0.80, the current payout ratio is a very conservative 51.2%. Shares are trading right on its long-term moving average, per the chart below. I think the stock can trade up to $20, implying a potential total return of over 25% in a year. Let's get long in this best-in-class hotel REIT at a deep discount. John Buckingham, The Prudent Speculator Real estate investment trust Kimco Realty has interests in 409 U.S. open-air shopping centers, comprising 72.4 million square feet of leasable space concentrated mostly in major metropolitan markets and housing a diversified stable of tenants. After a fantastic 2019 for KIM shares, 2020 is off to a lousy start, even as the company posted Q4 adjusted funds from operations (FFO) of $0.37, versus forecasts of $0.36, while occupancy rates ended 2019 at a record-high 96.4%, with anchor store occupancy at 98.9% and small shop occupancy of 89.3%. The period saw same-store net operating income grow 2.7% year over year as new and renewing rents increased. Management said it expects full-year 2020 FFO to be between $1.46 and $1.50 per share. We are positive on KIM's continued transformation and rejuvenation as the company finished 2019 with a stronger balance sheet, a higher quality portfolio of assets and a pipeline of development and redevelopment that can produce attractive long-term growth. While the retail environment isn't without headwinds, we like management's focus on better markets with higher barriers to entry. KIM currently yields a hefty 5.9%. Bob Carlson, Retirement Watch Real estate investment trusts have a low correlation with the broad stock indexes. That's one reason I frequently recommend owning them, especially through Cohen & Steers Realty Shares . The fund had its ups and downs in the last quarter of 2019, but it recently began a fresh rally back toward its August highs. CSRSX is up around 34.70% for the last 12 months. Like many of the funds I recommend, CSRSX's managers focus on a relatively small number of stocks they find attractive. Recently, it held 43 REITs and 43% of the fund was in the 10 largest positions. The fund first develops an economic outlook and then determines how the outlook will affect different REIT sectors. Finally, the fund's analysts use their extensive knowledge of the REIT world to identify REITs in those sectors with top quality properties and management that are selling at reasonable prices. The top sectors in the fund recently were infrastructure, apartments, health care, data centers and industrial. The largest positions in the fund were Equinix , American Tower , UDR , Welltower and Essex Property Trust . I continue to believe that this is a positive economic and investment environment for REITs. They might not replicate the strong returns of 2019 but should deliver strong, steady returns.

6 Attractive REITs for Growth and Income

These top picks include the REIT redeveloping New York's Penn Station and one that is smack dab in the middle of the 5G revolution.

Columnist Conversation

This Weekend on Real Money

ARKK: What Is Your Time Frame?

Retro 2010: Flash Crash Anniversary

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.