Smart income investors know that the best real estate investment trusts do just fine as rates rise; that’s been the case historically, and they’re rally again during this rate hike cycle too, asserts dividend expert Brett Owens, editor of Contrarian Outlook.
Real estate’s broader malaise hasn’t even spared New York City’s largest commercial landlord, SL Green Realty (SLG), which yields 3.5%. Its ownership interests are split among 116 Manhattan buildings and 21 suburban buildings in Brooklyn, Westchester County and Connecticut.
Investors should expect a bump in the quarterly dole to be announced sometime in late November or very early December – but don’t expect much. While the company’s dividend has blossomed by more than 60% since 2014, payout growth has slowed considerably during the past couple years.
I write about warehouse owner Stag Industrial (STAG) frequently. That’s no accident; STAG is a 5%-plus monthly dividend payer whose management prioritizes payout growth.
This is a highly diversified real estate play that owns 370 buildings across 37 states, leasing them out to companies in more than a dozen different industries, including automobiles, materials, transportation and retailing. Occupancy is a high 95.6% as of the last quarter.
AFFO for the first six months of 2018 came to $87.9 million — 19% higher than the year-ago period. That’s good news for continued growth in the monthly dole; management typically announces its intent to boost the payout in the first week of November.
Kite Realty (KRG) yields nearly 8%, but it has gotten to that ballooned yield the wrong way: a hemorrhaging share price. The stock has plunged 18% this year despite some decent results. Moreover, the REIT is aggressively deleveraging, with 6.5x leverage nearing its goal of 6x leverage.
But the company has been suffering longer-term from the narrative; as is a retail REIT that specializes in neighborhood and community shopping centers, its tenants are in the crosshairs of Amazon. The company’s FFO has been consistently dipping too — so this may not be just a boogeyman story.
All that said, Kite Realty has been good for a dividend-raise announcement near the end of November for years, and its operating results should keep that in play for this year.
