This article is the private, members-only continuation of our public report titled: Market Too Hot? Top 10 Big -Dividend REITs Worth Considering. Except this members-only version counts down the REITs we have ranked #5 to #1. Without further ado, here is the list…
5. Simon Property Group (SPG), Yield: 5.0%
Simply put, Simon is being significantly undervalued by the market. It’s big 5.0% dividend yield is extremely safe (Simon has the highest credit rating of all REITs), and the business and the dividend will both continue to grow. Two potential arguments (bad ones, in our view) for why the shares are trading so cheaply relative to Simon’s value are as follows. One, SPG operates shopping malls, and people are afraid shopping malls are going to be put out of business due to the rise of online shopping. While it is true some B-class shopping malls have been under tremendous pressure, Simon has A-class location malls and the business continues to set records in terms of growth and profitability. Secondly, if we are late in the economic expansion cycle, some investors fear Simon could start making bad/expensive acquisitions of struggling REITs when the market starts to turn south. In our experience, Simon management is hated in the industry because they’re ruthlessly disciplined (a good thing for shareholders). Simon’s management is extremely unlikely to make bad/expensive acquisitions, in our view. And in reality, they’ll likely make some very good ones at very attractive prices. Overall, the fears are overblown, and Simon’s dividend and shares are extremely undervalued. We own shares of Simon Property Group, and for more information, here is one of our recent write-ups on SPG.
4. Medical Properties Trust (MPW), Yield 5.6%
Medical Properties Trust is a self-advised real estate investment trust, which engages in investing and owning net-leased healthcare facilities. It focuses on funding hospitals and other facilities where patients must be admitted by doctors. And its fundamentals remain strong (see link below to our more detailed article on MPW). However, rather than purchasing shares outright, this is another example where we like the idea of generating upfront premium income by selling put options on MPW. Specifically, we like the July puts with a $18 strike price for premium of $0.25 per contract. We wrote in more about the attractiveness of this type of trade on MPW a few months back, and you can read that article here:
3. W.P. Carey REIT (WPC), Yield: 5.3%
The market continues to value WPC based on the REIT it used to be instead of the REIT it has become. Specifically, W.P. Carey has undergone major portfolio restructuring including its significant acquisition of Corporate Property Associates 17 Global (“CPA:17”) in October 2018, and its increased M&A and disposition activity, in general. And while this activity is creating some operating turbulence in the near-term, management believes its inorganic growth strategy will be accretive to AFFO/share in the long-term. And not only do we agree, but we think the market is not yet appreciating the value of these changes. We own shares of WPC, and you can read our recent full write-up on WPC here:
2. Welltower (WELL), Yield 4.6%
Welltower is a strong, healthy, blue chip, healthcare REIT with a big safe dividend. Unlike Ventas (a REIT similar to Welltower, and ranked #7 on this list) Welltower faces lower operator risk and is positioned better financially to continue to grow and benefit from the secular trend of rising health care needs driven by demographics. If you’re looking for safety and income, Welltower is worth considering for a spot in your diversified income-focused portfolio. We own shares of Welltower, and you can read our recent full write-up on Welltower here:
1. HCP, Inc (HCP), Yield: 5.0%
HCP Inc. (HCP) was forced to dramatically restructure its portfolio over the last several years as a distressed sub-industry created major challenges for one of its business segments. However, HCP is now emerging as a much healthier healthcare REIT going forward. Specifically, with major portfolio restructurings on the verge of completion, and a strong development and acquisition pipeline, HCP’s multi-year transformation has resulted in a much healthier and stronger business. The company now has a high-quality portfolio of healthcare assets, most of which derive their revenue from predictable private-pay sources. The market does not yet fully appreciate the new HCP. We own shares, and you can read our recent full write-up on HCP here:
For additional attractive high income opportunities, you can view all of our current portfolio holdings here.