It has been a tough start to 2018 for real estate investment trust (REIT) investors. Since the start...
Insiders Buying These Nifty Yields
05/24/2011 4:10 pm EST
A New York commercial REIT and a big oil shipper are paying solid dividends and garnering insider buying, writes Mark Skousen in High-Income Alert.
Based in Greenwich, CT, Urstadt Biddle Properties (UBP) owns, acquires, and manages commercial real estate properties, particularly grocery-anchored shopping centers in the New York metropolitan area. The trust owns more than 50 properties, comprising more than 4.6 million square feet of leasable area.
As a real estate investment trust (REIT), Urstadt does not have to pay federal income taxes. Instead, it pays at least 90% of net cash flow to shareholders in the form of dividends. That’s why the current yield here is an attractive 5.1%.
But there’s a lot more here to like: Urstadt plans to grow its business by opening new open-air shopping centers and retail properties in the New York metro area, focusing on communities within commuting distance of New York City. Management has proven that it can increase cash flow over time by renovating and then raising tenants' rents.
Financial metrics for Urstadt are already excellent. In the most recent quarter, net income jumped 58% on a 20% increase in revenue. Operating margins are a whopping 44%. And there is significant insider activity.
Let’s start with the fact that insiders own almost two-thirds of the outstanding shares. Then note that the company’s president and chief operating officer, Willing Biddle, recently purchased 22,300 more shares, an investment of roughly $380,000.
I see plenty of share-price appreciation—and a rising dividend—in the weeks ahead.
We’ve also seen insider buying at Overseas Shipholding Group (OSG), one of the largest publicly traded tanker companies in the world. It owns more than 100 vessels that transport crude oil and petroleum products, and it is moving ahead with 15 new shipbuilding projects in the United States, Korea, and China to satisfy growing energy needs in the global economy.
Director Charles Fribourg is so enthusiastic about OSG that he is buying shares regularly through an automatic purchase plan—including more than 156,000 shares last month alone. (He has accumulated nearly 500,000 shares in the past year.)
The stock is way down from its highs of $90 a share before the financial crisis, and even in the past year revenues dropped 4.4%. OSG is expected to lose $3 a share this year.
The oil-tanker business is notoriously cyclical. I think it’s sunk so low that the cycle is ready for a rebound. The company is selling for 82% of annual sales and less than half of its book value of $60. Meanwhile, the company continues to pay its regular quarterly dividend, yielding 6%.
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