Real Estate Investment Trusts or REITs own, operate, or finance real estate and generate rental income. REITs are required to pay out most of the profits as dividends. So, they offer a steady income stream.
The major market indexes have been highly volatile due to the Fed’s decision to raise interest rates aggressively to control inflation, which has hit a multi-decade high, and the tensions between the U.S. and Russia over Ukraine. So, investing in REITs can be a good strategy to hedge one’s portfolio against market volatility. In addition, real estate rents and property values increase during inflationary circumstances, helping REITs to increase their dividends. Furthermore, REIT dividends have outpaced inflation in all but two of the last 20 years as measured by the Consumer Price Index.
Given this backdrop, we it could be wise to add quality REITs Public Storage (PSA), Weyerhaeuser Company (WY), PotlatchDeltic Corporation (PCH), MFA Financial, Inc. (MFA), and Ladder Capital Corp (LADR) to one’s portfolio now.
Public Storage (PSA)
Glendale, Calif.-based PSA’s principal business activities include the ownership and operation of self-storage facilities that offer storage spaces for lease, generally on a month-to-month basis, for personal and business use, ancillary activities, such as merchandise sales and tenant reinsurance to the tenants. On Nov. 1, 2021, PSA announced the acquisition of All-Storage. The All-Storage portfolio comprises 56 self-storage properties located mainly in the Dallas-Fort Worth market. PSA’s CEO Joe Russell said, “The acquisition is a direct reflection of how the team at Public Storage is committed to driving growth through our four-factor platform, which includes acquisitions, development, redevelopment, and third-party management.”
PSA’s four-year average dividend yield is 3.4%, and its current payout translates to a 2.2% yield.
PSA’s revenues increased 23.4% year-over-year to $924.31 million for the fourth quarter, ended Dec. 31, 2021. The company’s net income increased 91% year-over-year to $558.05 million. Also, its EPS came in at $3.17, representing an 89.8% increase year-over-year.
Analysts expect PSA’s EPS for the quarter ending June 30, 2022, to increase 20.3% year-over-year to $2.37. Its revenue for the quarter ending March 31, 2022, is expected to increase 23.3% year-over-year to $945.98 million. And it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 44.9% to close the last trading session at $351.63.
PSA’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Sentiment and a B grade for Momentum, Stability, and Quality. It is ranked #2 of 21 stocks in the REITs – Industrial industry. Click here to see the other ratings of PSA for Growth and Value.
Weyerhaeuser Company (WY)
WY in Federal Way, Wash., is a timber, land, and forest products company that owns or controls timberlands, primarily in the United States, and manages additional timberlands under long-term licenses in Canada. The company’s segments include Timberlands; Real Estate; Energy and Natural Resources; and Wood Products.
WY’s four-year average dividend yield is 4.2%, and its current payout translates to a 1.8% yield.
For its fiscal fourth quarter, ended Dec. 31, 2021, WY’s net sales increased 6.9% year-over-year to $2.20 billion. The company’s net earnings increased 42.4% year-over-year to $416 million. Also, its adjusted EBITDA came in at $674 million, representing a 2.5% increase year-over-year.
Analysts expect WY’s EPS to increase 5% over the next five years. Its revenue for the quarter ending March 31, 2022, is expected to increase 7.9% year-over-year to $2.72 billion. Over the past six months, the stock has gained 9.6% in price to close the last trading session at $38.23.
It’s no surprise that WY’s has an overall B rating, which translates to a Buy in our POWR rating system.
It has a B grade for Value, Momentum, and Sentiment. Within the REITs – Diversified industry, it is ranked #3 of 50 stocks. To see the other ratings of WY for Growth, Stability, and Quality, click here.
PotlatchDeltic Corporation (PCH)
PCH operates sawmills and industrial-grade plywood mills, a residential and commercial real estate development business, and a rural timberland sales program. The Spokane, Wash., company manufactures and sells wood products and operates a residential and commercial real estate development business. Its business segments include Timberlands; Wood Products; and Real Estate.
PCH announced its merger with Loutre Land and Timber company on Dec. 22, 2021. It issued 1.96 million shares of common stock and assumed $6.60 million of debt in exchange for Loutre’s 51,340 acres of well-stock timberlands. President and CEO of PCH Eric Cremers said, “Loutre is a highly-attractive bolt-on acquisition that enhances our existing timberland footprint in southern Arkansas and northern Louisiana.”
Over the last three years, PCH’s dividend payout has grown at a 0.3% CAGR. Its four-year average dividend yield is 6.7%, and its current payout translates to a 3.3% yield.
PCH’s revenues for its fiscal year 2021 increased 28.4% year-over-year to $1.33 billion. The company’s adjusted net income increased 112.1% year-over-year to $421.35 million. In addition, its total adjusted EBITDA came in at $652.87 million, up 70.8% year-over-year.
Analysts expect PCH’s EPS to increase 5% over the next five years. Its revenue for the quarter ending March 31, 2022, is expected to increase 2.6% year-over-year to $349.74 million. It surpassed consensus EPS estimates in three of the trailing four quarters. And over the past six months, the stock has gained 5.2% in price to close the last trading session at $53.41.
PCH’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has a B grade for Value, Momentum, and Sentiment. It is ranked #9 in the REITs – Diversified industry. Click here to see the other ratings of PCH for Growth, Stability, and Quality.
MFA Financial, Inc. (MFA)
MFA is primarily engaged in investing in residential mortgage assets on a leveraged basis, including whole residential loans, residential mortgage securities, and mortgage servicing rights-related assets. The New York City company offers whole residential loans, including purchased performing loans, purchased credit deteriorated, non-performing loans, and own residential real estate.
MFA’s four-year average dividend yield is 13.1%, and its current payout translates to a 10.7% yield.
MFA’s net interest income for its fiscal year 2021 increased 47.4% year-over-year to $241.91 million. The company’s operating and other expenses declined 13% year-over-year to $123.01 million. Also, its net income came in at $295.99 million, compared to a $709.18 million net loss.
For its fiscal year 2023, MFA’s EPS is expected to increase 14.3% year-over-year to $0.56. Its revenue for the quarter ending March 31, 2022, is expected to increase 99.4% year-over-year to $63.36 million. It surpassed the Street’s EPS estimates in three of the trailing four quarters. Over the past year, the stock has declined 2.4% in price to close the last trading session at $4.08.
MFA’s POWR Ratings reflect this promising outlook. It has a B grade for Value, Momentum, and Quality.
It is ranked #4 of 29 stocks in the REITs – Mortgage industry. To see the other ratings of MFA for Growth, Stability, and Sentiment, click here.
Ladder Capital Corp (LADR)
New York City-based LADR is a commercial real estate finance company. The company’s segments include loans, securities, and real estate. It invests primarily in senior first mortgage fixed and floating rate loans collateralized by commercial real estate with flexible loan structures.
LADR’s four-year average dividend yield is 7.9%, and its current payout translates to a 7.1% yield.
LADR’s interest income increased 4.8% year-over-year to $52.99 million. The company’s distributable earnings increased 462.5% year-over-year to $27.71 million. And its distributable EPS came in at $0.21, representing a 320% increase year-over-year.
For the quarter ended March 31, 2022, LADR’s EPS is expected to increase 350% year-over-year to $0.18. Its revenue for the quarter ended June 30, 2022, is expected to increase 59.1% year-over-year to $59.78 million. It surpassed consensus EPS estimates in three of the trailing four quarters. And over the past six months, the stock has declined 1.5% in price to close the last trading session at $11.17.
It’s no surprise that LADR has an overall B rating, which translates to a Buy in our POWR rating system.
It has a B grade for Growth, Momentum, and Sentiment. It is ranked #4 in the REITs – Diversified industry. Click here to see the other ratings of LADR for Value, Stability, and Quality.
PSA shares were trading at $358.49 per share on Friday morning, up $6.86 (+1.95%). Year-to-date, PSA has declined -4.29%, versus a -8.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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