A Trio of "Preferred" REITs

12/16/2016 9:00 am EST

Focus: REITS

Harry Domash

Publisher, DividendDetective and Winning Investing

Taking advantage of last month’s downturn in prices for preferreds, we’re adding three new picks to our Preferred Stocks portfolio, asserts income expert Harry Domash, editor of Dividend Detective.

We can’t predict when and if preferred share prices bottom and start moving up again.

But, to our knowledge, all of our preferred issuers have strong balance sheets and hence, should have no problem funding the required dividends. Consequently, this is one instance where you’ll be well paid to wait .

These three new preferred picks that are trading 14% to 18% below their call prices. That means that in addition to their 6.1% to 8.4% yields, they’re offering 14% to 18% appreciation potential should they trade back up to their $25 call prices.

Thus, when the preferreds market recovers, holders could potentially enjoy double-digit capital appreciation on those picks.

They are trading at those discounts because the issuing companies, all REITs, are currently out of favor with market analysts. Why? They disappointed them by missing or cutting earnings and revenue forecasts.

But all have solid balance sheets and aren’t likely to run short of the cash needed to pay their preferred dividends.

Moreover, all three preferreds are “cumulative” meaning that the issuers remain on the hook for any missed dividends

Ashford Hospitality Trust 7.375% Series G (AHT-G)

Ashford owns 124 mostly upscale, full-service hotel properties operated under the Marriott, Hilton, Starwood, Hyatt and Intercontinental brands.

Issued 10/30/16, these preferreds recently traded at $21.86, a 14% discount to their call price. The market yield is 8.4% and yield to call is 10.7%. Not credit rated.

National Retail Properties 5.20% Series F (NNN-F)

National owns over 2,400 retail store properties in 48 states. Issued 10/4/16, these preferreds are credit rated investment quality (BBB-).

These preferreds recently traded at $21.35, an 18% discount to their call price. Market yield is 6.1% and yield to call is 8.9%.

PS Business Parks 5.20% Series W (PSB-W)

PS Business Parks owns office and industrial properties leased to 4,900 customers in six states.

Issued 10/11/16, these preferreds, credit rated investment quality (BBB), recently traded at $21.46, a 16% discount to their call price. Market yield is 6.1% and yield to call is 8.8%.

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By Harry Domash, Editor of Dividend Detective

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