REITs are viewed as bond surrogates. The value of bonds and similar income investments frequently de...
Intelligent REIT Eyes Sustainable Infrastructure
10/20/2017 5:00 am EST
I’ve just done a detailed analysis of some of the most reliable dividend payers in the REIT universe. To filter out the “best from the rest” I decided to select the REITs with the best dividend growth record, explains Brad Thomas, editor of The Intelligent REIT Investor.
In addition, I opted to select the REITs with the highest dividend growth forecasted over the next few years. I also decided to screen out these REITs based upon their overall price “cheapness”.
One of the REITs that passed my screen, I selected was Hannon Armstrong Sustainable Infrastructure Capital (HASI). It is my #1 small cap REIT, year-to-date. The shares have returned a whopping 32.3% year-to-date and the fundamentals are solid.
HASI is in an enviable space — it is positioned to take advantage of the opportunities to refinance the electric power industry in the US, and these changes require financing.
As the utility industry continues to evolve, HASI can exploit the growth by providing capital to a growing number of businesses. HASI’s flexibility in deal size and tenor is one of its competitive advantages.
In the 2nd quarter of 2017, HASI generated core earnings of $17.9 million (or $0.34 per share) and the REIT has maintained a predictable pattern of growing core EPS by around 12% annually.
HASI does not have the cap-ex costs that the net lease REITs have, so the REIT pays out virtually 100% of its income (and over the last 2 years, over 60% of its dividends have been treated as return of capital due to available tax attributes from income for the taxable REIT subsidiary). The dividend yield is now more than 5% and the P/E multiple is 18.8x.
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