Marty Fridson, a leading specialist on dividend investing strategies and editor of Fridson-Forbes Income Securities Investor, reviews a pair of real estate investment trusts suitable for low- to medium-risk tax deferred portfolios.
Highwoods Properties (HIW) is an office property REIT that owns, develops, and leases properties in the upscale business districts of Atlanta, Charlotte, Raleigh, Nashville, Richmond, Orlando, Tampa, and Pittsburgh. The company entered the Dallas market in July 2022.
HIW owns and/or manages almost 27 million square feet of property space with more than 1500 customers. Although the company remains growth-oriented, it has maintained a solid balance sheet with ample financial flexibility. More than 60% of the REIT’s net operating income is derived from Raleigh (24%), Nashville (22%), and Atlanta (16%).
The REIT's solid balance sheet is evidenced by secured debt accounting for only 7.3% of gross assets. HIW reported 3Q 2022 funds from operations (FFO) of $111.6 million or $1.04 per share, up 8.6% from a year ago. FFO topped analysts’ $0.96 estimates, while total revenue of $207.0 million was slightly better than expectations and up 5.9% year-over-year.
This REIT common stock investment is suitable for low- to medium-risk tax-deferred portfolios. Dividends are taxed as ordinary income and have remained stable with steady growth. Buy at $39.00 or lower for a 5.13% annualized yield.
Realty Income Corp. (O) is a commercial property REIT with over 11,400 properties, owned under long-term net lease agreements, typically 10-20 years with commercial clients.
The REIT’s property mix cuts across 72 different industries and is leased to more than 1,100 different clients throughout all 50 U.S. states and Puerto Rico. The company has demonstrated a strong performance record throughout its 53-year history and increased the monthly dividend 117 times since going public in 1994.
Realty Income completed its merger with VEREIT, almost a year ago, which strengthened its position as the leading net lease REIT. With this transaction, the company completed the spinoff of substantially all the office properties of both companies into a new publicly traded REIT named Orion Office REIT, Inc. (ONL).
Realty Income reported 2Q 2022 adjusted funds from operations (AFFO) of $583.7 million or $0.97 per share, up 10.2% from a year ago and beating analysts’ $0.95 estimates. Revenue of $810.4 million for the quarter edged ahead of estimates.
We continue to recommend Realty Income for low- to medium-risk tax deferred portfolios. Dividends are taxed as ordinary income. Buy at $70.00 or lower for a 4.24% annualized yield.
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