Three REITs for a Contrarian Watch List

08/04/2020 5:00 am EST

Focus: REITS

Brett Owens

Chief Investment Strategist, BNK Invest, Inc.

REITs were trashed swiftly and thoroughly as soon as investors realized April rent payments were going to be a disaster. Fair enough, but with a few months of pandemic land-lording in the books, we now have evidence that select REITs are going to be mostly fine, suggests Brett Owens, editor of Contrarian Income Report.

Our old friend and previous holding W.P. Carey (WPC) is back on my radar screen now that its yield is all the way up to 6.3%. Its diversified book of industrial properties is continuing to cash flow for the firm. Our readers will fondly recall the 24% returns we made in our 12 short months holding WPC!

Meanwhile STORE Capital (STOR) pays 5.9%. It’s a “triple-net-lease” REIT, which means its commercial tenants are on the hook for not only rent but also taxes, insurance and maintenance costs. A handy agreement to have at a time like this! Like WPC, STOR is paying about as much as it ever does at the moment.

Finally, we continue to wait for an ideal opportunity to repurchase Medical Properties Trust (MPW), the hospital REIT that doubled our money for us a few years back.

Founder Edward Aldag notes that even usually steady hospital cash flows are a bit uncertain at the moment. Hospitals are prioritizing COVID-19 patients and deferring non-critical procedures, which is the right thing to do from a human standpoint but creates potential gaps in cash flow.

I believe Ed and his excellent MPW team will eventually find a way to the other side. Shares yield 5.6% today, but my sense is that we’ll have an opportunity to get more dividend for our dollar in the months ahead as MPW muddles through the current environment that is challenging, even for hospitals.

To sum it up: Be careful today but prepare to be greedy soon. This pullback might be a short one thanks to all of the new money sloshing around.

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