REIT Investing | The Best REITs
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- Опубліковано 23 лип 2024
- REIT investing is something 80 million Americans dabble in, but you'd be hard pressed to find anyone who can explain these complex structures simply. We propose one simple metric to be the ultimate measure of the best REITs - how many years in a row has the REIT increased their dividend? It's a measure of how disciplined and risk-averse a REIT management team is, not to mention it benefits investors who can count on a growing stream of income over time. We identify six REITs that have increased dividends for at least 25 years or more - Realty Income $O, Federal Realty Investment Trust $FRT, Essex Property Trust $ESS, Universal Health Realty Income Trust $UHT, National Retail Properties $NNN, and W.P. Carey $WPC. We'll walk you through the process of how we select the best three REITs for beginner investors to own.
RESEARCH PIECES USED IN THIS VIDEO:
1. Quantigence - A Dividend Growth Investing Strategy
www.nanalyze.com/dividend-gro...
2. Investing in Big Data with Data Center REITs
www.nanalyze.com/2022/06/inve...
3. The Smaller the Stock, the Bigger the Risk
www.nanalyze.com/2022/01/smal...
CHAPTERS:
00:00 Intro
01:04 How do REITs work?
02:24 Why we own REITs
04:27 Many types of complex REITs
06:10 The problem with debt
07:57 What REIT success looks like
12:09 REIT dividend champions
13:55 Geographic concentration risk
15:17 Triple-net REITs
17:34 Realty Income $O plays defense
19:53 W.P. Carey $WPC comes out
21:33 Just say not to $NNN
22:22 Other champion REITs
23:59 The REITs we hold
26:49 Conclusion
ABOUT US:
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I love REITs. I own Realty Income and LTC Reit.
They're a great addition to any portfolio.
Joe, My indicator triggered a possible breakout for the REIT sector. I then checked for REIT charts, most of them are already broke out on the second leg up. NNN, O, FRT, MPW. WPC just broke out on the first leg, too early to confirm on the breakout until breakout on 2nd leg.
Dollar cost averaging over time will smooth that out in case the tea leaves were lying ;)
I used to think REITs are stocks so when comparing with stocks, they become less attractive. If we see it in term of another asset class - a collection of diversified physical assets with low correlation to stocks and stable income generation, then it may be another story. I understood more why we need to hold some REITs in portfolio. It reminds me of portfolio theory from Markowitz and all weather strategy from Ray Dalio. Thank you so much Joe
You are most welcome Boonyawai!
Not a paid subscriber so i will take a number & stand in line however i am curious if Nanalyze has a vid on the merits (?) of BDCs versus REITS which they seem to resemble. Particularly in that they pose a similar downside risk of loss of capital. Are BDCs another category of risk altogether or do they differ amongst themselves in the same way you detail with REITS?
Great fan & follower of Nanalyze tho my minuscule investments keep me nibbling at the crumbs. I have referred a younger friend to your vids on basic investment strategy. You are a great antidote to the UA-cam world of fintech frenzy.
"...will take a number and stand in line." :) We always love to help people because they always become our best customers when they see we're competent and add value. About BDCs, others have raised this topic numerous times, though they remain a very obscure (based on interest) asset class. This is on my radar, though it may not be popular enough to merit a video right now.
As we grow this channel, we need to focus on "bang for buck" because these videos take a ton of time to produce. A BDC one would be really interesting I think but few people would watch it. Then we need to make it all clickbait which I don't like doing. At any rate, thank you for the kind words, for sharing our channel, and I will keep this in mind as it's a topic that keeps coming up. Joe P.
Excellent. No BS as usual. Simple and easy to understand. Thank you Joe. One question, given much of the western world seems to be in a real estate bubble at the moment, if someone is going to invest in a REIT, what is the minimum time frame one would need to hold, 5,10,20 years ?
That's a really good question Tim. The REITs we discussed generally dabble in commercial real estate and to be perfectly honest, we're not familiar with whether that's in a bubble or not. Residential certainly seems to be. Great question on time frame. We've been in our own REITs for over ten years and focus on the growing income streams. The REITs we covered in this piece seem really durable. As price falls, yield goes up. As yield goes up, the assets look more attractive and investors step in to buy them, thus forming a sort of price support. With any asset we look to buy it's a ten year horizon minimum. Thank you for the kind words and great question.
Tim look at it this way, REIT's are used for truely passive income, so how long do YOU want to hold it for?..
No one asked me, but I do no sell REIT's unless they stop paying Dividends, there are many reasons for that to happen, none of they good......
What do you think about LTC Reit?
We haven't looked at any REITs sufficiently to comment on them, just the ones we covered in this video.
What is your thought on ADC & VICI?
We can't provide commentary on demand as researching any given stock usually involves a day's worth of research. Paying subscribers who raise stocks on our Discord server will be given priority. ;)
Thank you!
You are quite welcome Scott.
When picking companies for dividend, how much importance do you place on their share prices over time? For example, for the past 5 years, the share prices of FRT, O, and WPC have decreased by more than 25%. Is the logic that as long as there is high probability the companies can sustain increases in dividend yield year-over-year, you don't worry too much about the share prices? While you may not be too concern now, couldn't this become an issue later if you decide to sell the shares and the price has gone down a lot?
"Is the logic that as long as there is high probability the companies can sustain increases in dividend yield year-over-year, you don't worry too much about the share prices?" Precisely. And the only reason we sell is if a dividend stops growing. What you end up with is loads of capital gains you haven't even touched and a growing income stream which means you don't even need to touch the principle. Works very well over time.
@@Nanalyze Thank you so much for the explanation. I have just started learning about dividend investing, and your videos have been educational. In the past, I just put my money in CDs, because it offered safety and a decent return. Now, I understand the importance of increasing dividend yield and compounding. Inflation could reduce my 5% return on my CDs to only 1% or 2%. I appreciate your hard work. I'm considering buying your report on Dividend Kings and Aristocrats, but I see that I'm a little late for the sale. I hope you would consider having another sale soon for your subscribers. Thanks again!
@@user-ll9qk2el4d You are most welcome! Yes, we'll have more sales in the future, don't worry!
SOOOOOO WHAT ARE THE BEST REITS TO INVEST IN?
Watch the video and figure it out.
Such a great video! Sad to see WPC removed themselves from consideration with the dividend cut in 2023, but it makes the question to invest or not an easy one! Thanks for everything you provide on this channel, newsletter etc.
You're most welcome, glad you found this useful. We were also bummed to see WPC let that happen. Why a company decides to blow such a notable track record is beyond us.
@@Nanalyze The heath and longevity of the company is more important to their dividend track record
@@chrisc9389 We have an entire methodology - Quantigence - that ranks dividend growth companies based on the likelihood they will continue increasing their dividends in the future. This strategy - developed over a decade by finance professionals - uses seven factors. It's pretty cool so be sure to check it out!
Isn’t it a terrible time to buy REITs now based on increasing Yields?
Increasing interest rates you mean? There are plenty of opinions about how REITs respond to rising interest rates.
From Nareit: "Historically, REITs have performed well during periods of rising long-term interest rates with average four-quarter return in periods with rising rates of 16.55% compared to 10.68% in non-rising rate periods from the first quarter of 1992 to the fourth quarter of 2021."
From S&P Global: "It is commonly asserted that REITs are destined to underperform when interest rates rise. However, an examination of the historical record suggests that this is a misconception. Although interest rates certainly affect real estate values and, therefore, the performance of REITs, rising interest rates do not necessarily lead to poor returns."
The main concern with REITs is cap rate (real estate term that is basically "inverse pe" - cap rate of 5% = pe 20) compression. Real estate in general has long periods of fixed rent payments which while having escalations are typically not in excess of 3.0% per year for however many years. As of writing this, you'd still be losing money in the US based on inflation alone. The biggest killer of value though is when cap rates increase. NNN leased properties (such as $O, $WPC and others) have ridden the wave of the lowest period of cap rates in history, but now the tides are shifting and the liquidity in the markets is waining with the credit markets being reluctant to lend.
Be careful as well of how "assets" are reported. Real estate is valued only three ways:
1) how much income the property will generate
2) depreciate cost of the buildings + land
3) sales comparisons of similar properties
When REITs report assets, they have incredible leeway on how its reported. Almost all of the "value" for NNN reits comes from the income stream and the quality of the income stream (quality of tenants). The secondary market for former Burger Kings, banks or grocery stores are nothing compared to when they are leased.
@@Nanalyze just be careful. What no one likes to acknowledge is the 2020-2022 cap rates were and have been at an all time low and now certain asset types are trading at negative yields to the 10 year treasury and to inflation. To my knowledge, we have never had a scenario like this before. In the 60s-GFC, cap rates were much higher. Extended periods of low interest rates put significant upward pressure on pricing. The risk premium that most of these are trading at, for me personally, do not justify the pricing. Not saying they aren't good companies, but its always worth considering the price being paid for them.
@@overtlooked Very good point James. You appear to have a great deal of subject matter expertise in this area so thank you for taking the time to articulate your thoughts. We've been in these REITs for over a decade so hadn't really thought about market timing. Very good point.
Hi there - really appreciate your analysis. It’s very informative.
I really could do without your sarcasm on the firms inclusion of “people of color” in their content. It’s really not helpful and takes away from the video.
Thank you for the feedback Colin! You're quite welcome and we're glad you found it informative.
We believe that firms who hire people based on the color of their skin, or whether they sit down or stand up to take a piss, or whether or not they dabble in both sexes, or whether or not they have blond hair, or any other arbitrary criteria other than competency, do a disservice to shareholders, their employees, and the marginalized individuals they claim to be supporting. D&I is divisive, damaging, and goes against a firm's fiduciary responsibilities to shareholders. We will continue - as we always have - to call out companies that dabble in this rubbish. That said, your feedback is always valuable and will always be considered as input for future videos..
@@joepiv respectfully, I would be very interested to see the data that you have which demonstrates how D&I goes against a firm’s fiduciary responsibility.
I’m not all that convinced.
Sure. We'll plan to do an entire presentation on it because it's that important.