&l;p&g;&l;img class=&q;dam-image getty size-large wp-image-944403922&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/944403922/960×0.jpg?fit=scale&q; data-height=&q;639&q; data-width=&q;960&q;&g; The closing numbers are displayed on the floor at the closing bell of the Dow Industrial Average at the New York Stock Exchange on April 10, 2018 in New York. / AFP PHOTO / Bryan R. Smith (Photo credit should read BRYAN R. SMITH/AFP/Getty Images)
One of the great things about being a value investor is that you can gain an edge over the market timers or the Index fund buyers. By paying close attention to profit margins, a value investor can seek to avoid painful losses by focusing on high-quality companies that have a strong record of dividend growth.
&l;p class=&q;tweet_line&q;&g;Most REITs have become cheaper year-to-date as a result of the fear of rising rates. There is no doubt that they (REITs and Rates) are correlated, but the reality is that REITs thrive in an environment when rates are modestly increasing.
By extension, some of the most attractive buying opportunities in REITs have resulted when investors erroneously drove down REIT share prices because of rate increases.
More importantly, investors shouldn&a;rsquo;t simply go out and load up the truck on REITs that offer high-dividend yields. You must first consider the safety of the dividend the ability for the dividend to grow , and the overall merit of the REIT itself. As Benjamin Graham explained (&l;em&g;The Intelligent Investor&l;/em&g;),
&l;/p&g;&l;blockquote&g;&a;ldquo;The defensive investor must confine himself to the shares of important companies with a long record of profitable operations and in strong financial condition.&a;rdquo;&l;/blockquote&g;
&l;strong&g;6 High-Quality REITs Yielding Over 6%&l;/strong&g;
&l;strong&g;Ventas, Inc.&l;/strong&g; (VTR) is a leading healthcare REIT that owns a highly diversified portfolio of more than 1,200 seniors housing, healthcare and research properties in the U.S., Canada and the United Kingdom. VTR has a highly diversified business model that consists of the industry&s;s top care providers. The company&s;s investments across the healthcare real estate spectrum provide sustainable, growing cash flow during strong economic cycles and resilience during downturns.
Last week VTR updated its normalized FFO per share guidance range of $3.99 to $4.07 representing a $.03 per share improvement at the midpoint compared to its previously disclosed guidance of $3.95 to $4.05, driven by the strong start to the year. VTR shares are now trading at a wide discount (P/FFO is 12.5x) with a super-sized dividend yield of 6.1 percent.
&l;a href=&q;https://blogs.forbes.com/bradthomas/files/2018/04/vtr.jpg&q; target=&q;_blank&q;&g;&l;img class=&q;size-medium wp-image-3069&q; src=&q;http://blogs-images.forbes.com/bradthomas/files/2018/04/vtr-300×233.jpg?width=960&q; alt=&q;&q; data-height=&q;233&q; data-width=&q;300&q;&g;&l;/a&g; Source: FAST Graphs
&l;strong&g;Physicians Realty&l;/strong&g; (DOC) is also a healthcare REIT that focuses exclusively on medical office buildings (or MOBs). DOC now has more than 14 million square feet of high quality medical office space with approximately 50% of all of that space leased to investment grade health systems and their affiliates. 2017 was a landmark year for DOC with $1.4 billion in total investments, demonstrating the power of DOC&a;rsquo;s hospital relationships through the acquisition of some of the highest quality medical office facilities in the country. During the year, DOC integrated over 3.3 million square feet and 260 new tenants to its ownership.
DOC is now yielding 6.1 percent and I consider that highly attractive, especially when you consider the enhanced credit quality of DOC&a;rsquo;s portfolio. I am especially glad to see DOC continue to reduce its Payout Ratio, signaling that a dividend increase could be soon (late 2018 or early 2019).
&l;a href=&q;https://blogs.forbes.com/bradthomas/files/2018/04/doc.jpg&q; target=&q;_blank&q;&g;&l;img class=&q;size-medium wp-image-3070&q; src=&q;http://blogs-images.forbes.com/bradthomas/files/2018/04/doc-300×232.jpg?width=960&q; alt=&q;&q; data-height=&q;232&q; data-width=&q;300&q;&g;&l;/a&g; Source: FAST Graphs
&l;strong&g;LTC Properties&l;/strong&g; (LTC) dividend yield has breached 6 percent, the company has maintained very consistent record of increasing dividends, the company has raised its dividend every year except 2009 (when the company just froze the payout and did not cut the dividend).
LTC invests primarily in senior housing and long-term healthcare property types, including skilled nursing properties (50.8%), assisted living properties (46.9%), independent living properties and combinations thereof. The company owns a portfolio of 201 properties, 3 development projects and 4 land parcels (in 29 states).
LTC trades at a deep discount (P/FFO is 11.8x) and the dividend yield is 6.3 percent.
&l;a href=&q;https://blogs.forbes.com/bradthomas/files/2018/04/ltc.jpg&q; target=&q;_blank&q;&g;&l;img class=&q;size-medium wp-image-3071&q; src=&q;http://blogs-images.forbes.com/bradthomas/files/2018/04/ltc-300×233.jpg?width=960&q; alt=&q;&q; data-height=&q;233&q; data-width=&q;300&q;&g;&l;/a&g; Source: FAST Graphs
&l;strong&g;Tanger Factory Outlets&l;/strong&g; (SKT) is a &a;ldquo;pure play&a;rdquo; outlet center REIT that owns 44 outlet centers in the U.S. (22 states) and Canada. Tanger IPO&a;rsquo;d in June 1993 as the first publicly-traded outlet company when it was listed on the New York Stock Exchange.
Tanger is laser-focused on curating an optimal tenant roster for each of its properties and improving the portfolio occupancy rate to grow NOI. In 2017, Tanger&a;rsquo;s AFFO per share (FFO adjusted to eliminate certain items that are not indicative of ongoing operating performance) increased 4% to $2.46 per share, compared to $2.37 per share the prior year.
Tanger is trading at bargain basement levels (P/FFO is 9.9x) and the dividend yield is 6.3 percent.
&l;a href=&q;https://blogs.forbes.com/bradthomas/files/2018/04/skt1.jpg&q; target=&q;_blank&q;&g;&l;img class=&q;size-medium wp-image-3072&q; src=&q;http://blogs-images.forbes.com/bradthomas/files/2018/04/skt1-300×231.jpg?width=960&q; alt=&q;&q; data-height=&q;231&q; data-width=&q;300&q;&g;&l;/a&g; Source: FAST Graphs
&l;strong&g;Brixmor Property Group&l;/strong&g; (BRX) is a shopping center REIT with gross leasable square footage of 83 million square feet, one of the largest &q;pure play&q; wholly owned grocery-anchored platforms in the U.S. (average shopping center size is 170,000 sf). Around 70 percent of Brixmor&a;rsquo;s shopping centers are grocery-anchored and ~76 percent have an additional anchor.
Brixmor has the lowest payout ratio in the shopping center REIT sector, and this means the company has plenty of capacity to grow the dividend in the future. The dividend yield is already 7.3 percent, making Brixmor an ideal pick for this high-quality list.
&l;a href=&q;https://blogs.forbes.com/bradthomas/files/2018/04/brx.jpg&q; target=&q;_blank&q;&g;&l;img class=&q;size-medium wp-image-3073&q; src=&q;http://blogs-images.forbes.com/bradthomas/files/2018/04/brx-300×233.jpg?width=960&q; alt=&q;&q; data-height=&q;233&q; data-width=&q;300&q;&g;&l;/a&g; Source: FAST Graphs
&l;strong&g;Kimco Realty&l;/strong&g; (KIM) is one of the largest publicly traded portfolios of neighborhood and community shopping centers in North America. The company was founded in 1958 and listed shares in 1991. In 2006, Kimco was added to the S&a;amp;P 500 Index. The company owns a well-balanced portfolio of 492 U.S. shopping centers comprising 83 million square feet of leasable space primarily concentrated in the top major metropolitan markets.
Kimco announced impressive first quarter earnings results last week including 5.4 percent growth in Funds from operations (or FFO) and growth in same-property net operating income of 2.6% over the same period in 2017. KIM also increased pro-rata occupancy to 96.1%, representing year-over-year and sequential improvement of 80 and 10 basis points, respectively.
Kimco trades at a deep discount (P/FFO is 9.8x) and a dividend yield of 7.6 percent.
&l;a href=&q;https://blogs.forbes.com/bradthomas/files/2018/04/kim1.jpg&q; target=&q;_blank&q;&g;&l;img class=&q;size-medium wp-image-3074&q; src=&q;http://blogs-images.forbes.com/bradthomas/files/2018/04/kim1-300×233.jpg?width=960&q; alt=&q;&q; data-height=&q;233&q; data-width=&q;300&q;&g;&l;/a&g; Source: FAST Graphs
I own shares in VTR, LTC, KIM, SKT, BRX, and DOC.
Source: FAST Graphs