A REIT to Bet on Bakken Growth
10/07/2013 7:00 am EST
North Dakota's Bakken shale oil field is one of the most prolific oil fields ever discovered; with an estimated 24 billion barrels of recoverable oil, the economy of North Dakota should benefit tremendously in future years, suggests Brian Hicks, editor of The Wealth Advisory.
Currently, North Dakota is ranked sixth in the nation in terms of per capita GDP, with an increase of 11% from 2010 to 2011. Looking forward, the development of the oil industry should create a GDP growth for North Dakota that strengthens the economy of the state.
Right now, the economy of North Dakota is attractive for investment. The ability to find companies directly involved in the boom will give investors exposure to an area experiencing expansion while much of the US is still dealing with the recent recession.
One such stock is Investors Real Estate Trust (IRET), which owns a diversified portfolio of income-producing properties. Its multifamily residential, office, medical, industrial, and retail properties are located in 12 states, primarily in the Upper Midwest.
The company has several new properties coming online in North Dakota, where 18% of its portfolio already sits. The economic and job boom happening near the Bakken shale region should provide a significant tailwind to real estate appreciation and strong occupancy rates.
It has just under $2 billion worth of properties under management. This REIT also has a very healthy dividend yield of 6.4%.
Investors Real Estate Trust is selling at just over 12 times next fiscal year's projected FFO, or funds from operations—the REIT equivalent of what earnings represent for equities.
This REIT also has several other attractive features...the regions of the country in which the company's property portfolio is situated are growing faster than the country as a whole.
It also has a large presence in Minnesota, with multiple medical real estate facilities that are over 94% leased. Finally, the company has a clean balance sheet, with a weighted average interest rate on its overall debt that is under 6%. We rate Investors Real Estate Trust a buy under $8.50 a share.
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