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Intelligent REIT Eyes Sustainable Infrastructure

10/20/2017 5:00 am EST

Focus: REITS

Brad Thomas

Editor, Forbes Real Estate Investor

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.

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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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