Uniti Group and EPR Properties: Strong REITs on Sale

08/15/2017 2:56 am EST

Focus: REITS

Tim Plaehn

Investment Research Analyst, Investors Alley

It is hard to predict share prices. My strategies involve buying stocks that pay attractive dividends and to build a portfolio for income instead of trying to time share price changes, states Tim Plaehn, editor of Investors Alley's The Market Cap.


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Sometimes a good company can have a bad quarter or just the perception of bad quarter. The stock price goes down and the dividend investor considers buying shares on the cheap to boost that dividend income. It takes fortitude to invest this way, but history shows that the share prices of dividend paying stocks do recover.

Today I'll share with you two income REITs where some quarterly earnings news has hurt current share prices but long-term prospects remain strong.

Uniti Group (UNIT) is a real estate investment trust (REIT) that owns telecommunication infrastructure assets such as fiber lines and cell towers.

In April 2015, UNIT was spun off by Windstream Holdings (WIN). UNIT took Windstream's fiber and copper landline network and leased it back to Windstream.

At that time, Windstream provided 100% of UNIT's revenues. The company has made acquisitions, and currently the Windstream payments are 70% of UNIT's revenues.

For the 2017 second quarter, WIN announced it was suspending dividend payments. The WIN share price dropped by 35% and in sympathy UNIT declined by 8% to a new low for the year.

At this point the dividend suspension by WIN was probably a good move. The company will be more secure to continue to make the rental payments to UNIT.

Windstream cannot continue to exist without access to UNITs network. At the current 10.4%, UNIT has a great yield, with significant upside on the share price.

EPR Properties (EPR) is a REIT that owns a portfolio of three specialty commercial property types: multi-plex movie theaters, charter and private schools, and recreational properties for golf, water sports and skiing.

EPR's largest client, AMC Entertainment Holdings (AMC) reported disappointing second quarter earnings, and the AMC share price dropped by 25%.

The AMC troubles caused EPR to drop by 5%. First, I looked at the AMC results and they weren't that bad. Second, EPR is a net lease REIT so its revenues are secure.

As a result, the shares of a very high-quality REIT are on sale. EPR yields 5.9% and the dividend will grow by 6% to 8% per year. And, EPR is a monthly dividend payer.

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