Getting maximum returns as an investor is not always about the stocks you buy because it’s also important to buy them at the right time. Everyone talks about “buying when there’s blood in the streets,” but it’s not easy to summon up the courage to do so.
Most real estate investment trusts (REITs) have been in a bear market since the beginning of 2022. The Vanguard Real Estate Index Fund ETF VNQ, which tracks better-quality REITs, traded near $110 in January 2022 but declined to the low $70s by October 2022. It has since recovered somewhat but only to about $84 — still 23% off its highs.
As REIT prices have fallen, yields have increased dramatically, but along with higher yields comes speculation as to whether the dividends will hold up. Successful investors learn to ignore all the talk and instead focus on stocks that appear to be undervalued, especially if dividend yields are high.
The market has a long history of overselling REITs when facing a potential recession, providing an incredible opportunity for investors to "lock in" massive yields. Gain access to insights from Benzinga's real estate research team with the free Weekly REIT Report.
Take a look at three REITs with double-digit dividends that have also had double-digit returns over the last four weeks. These stocks are so much off 2022 highs that they still may have plenty of room to run.
TPG RE Finance Trust Inc. TRTX, a subsidiary of TPG Real Estate, is a balance sheet lender with a $5.3 billion portfolio of first-mortgage loans above $50 million in geographically diversified primary and select secondary markets across the U.S.
TPG RE Finance Trust was down 37.85% in 2022. In February, it began to bounce back following fourth-quarter operating results in which generally accepted accounting principles (GAAP) earnings per share (EPS) of $0.42 beat the analysts’ estimates by $0.29. But on May 2, its first-quarter EPS of $0.05 missed estimates by $0.21. That news sent shares tumbling to $5.25, but shortly thereafter, the price recovered and is back up to a recent closing price of $7.78.
On June 13, JMP Securities analyst Steven DeLaney reiterated a Market Outperform rating on TPG RE Finance Trust and maintained his $10 price target. Raymond James analyst Stephen Laws also has a Strong Buy rating and a $9 price target on TPG RE Finance Trust. Analysts have been predicting an increase in annual revenue of nearly 30% in 2023 over 2022.
On June 14, TPG RE Finance Trust announced its board declared a quarterly dividend of $0.24 per share, payable on July 25 to shareholders of record as of June 28. The annual dividend of $0.96 per share presently yields 12.34%.
Over the past month, TPG RE Finance has led all REITs with a 36.97% gain.
Uniti Group Inc. UNIT is a Little Rock, Arkansas-based specialty REIT that acquires and constructs mission-critical communications infrastructure in the form of fiber optics, copper and coaxial broadband networks.
Uniti Group owns and operates 137,000 fiber route miles covering 275,000 commercial buildings in 300 metro markets, with most of its network in the Eastern and Midwestern U.S. It’s one of the 10-largest fiber providers in the U.S. today, and its fiber optic leasing generates about 70% of its total revenue.
On May 4, it released its first-quarter operating results. Adjusted funds from operations (AFFO) of $0.39 beat the estimates by $0.16, and revenue of $289.82 million beat the estimates by $2.93 million and was up 4.2% year over year.
Despite the good earnings, analysts have not changed their views on Uniti Group recently. Morgan Stanley analyst Simon Flannery maintained an Underweight rating on Uniti Group on June 1 while lowering the price target from $7 to $6. On May 30, RBC Capital Markets analyst Bora Lee maintained a Sector Perform rating on Uniti Group but lowered the price target from $7 to $5.
But investors have reacted differently. Uniti Group has been steadily rising since the end of April and over the past month, it rose 22.97%. It paid a $0.15 quarterly dividend on June 15. The annual dividend of $0.60 per share has been the same since 2020 and presently yields 13.19%.
Medical Properties Trust Inc. MPW is a Birmingham, Alabama-based healthcare REIT that owns and operates 444 general acute care and other properties across the U.S. and in nine other countries, with locations in Europe and Australia. It has a portfolio worth $19.7 billion.
Throughout 2022, Medical Properties Trust was out of favor with Wall Street. Articles in The Wall Street Journal and elsewhere questioned a loan arrangement between Medical Properties Trust and Steward Health Services, its largest tenant, that drove the price down in the spring. The Street was worried that Steward might be on the verge of bankruptcy, and investors were disappointed with the lack of an immediate response by Medical Properties Trust management to the WSJ report.
Short sellers came out in force, driving Medical Properties Trust shares lower. By the end of January, there were 102.7 million shares being shorted and a short ratio (the number of days it takes to cover all of the short positions) of 8.3. Viceroy Research came out with a report alleging financial mismanagement, further emboldening the short-selling.
By late March, Medical Properties Trust, which traded near $22 per share in January 2022, was below $7. But after the Federal Reserve announced it would pull back from larger rate hikes, most REITs, including Medical Properties Trust, began to rebound.
On May 23, Medical Properties Trust announced positive news affecting one of its largest tenants, Prospect Medical Holdings Inc. Prospect Medical Holdings affiliates had just completed $375 million in new loans from third-party lenders to keep its hospital operations going with liquidity. Shares of Medical Properties Trust began to move higher on the news.
Investors seem to either love it or hate it, but over the past four weeks, Medical Properties Trust has climbed 19.53%. The annual dividend of $1.16 per share presently yields 12.64%.
Weekly REIT Report: REITs are one of the most misunderstood investment options, making it difficult for investors to spot incredible opportunities until it’s too late. Benzinga’s in-house real estate research team has been working hard to identify the greatest opportunities in today’s market, which you can gain access to for free by signing up for Benzinga’s Weekly REIT Report.
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