The bear market has not only been a beast for most stocks, it has also created some beauties in the form of beaten stocks that attract renewed buying attention.
I’m primarily an income investor interested in supplementing retirement cash flow, so the three I’m focusing on here are all real estate investment funds (REITs): Real estate land (TRNO 0.39%), Alexandria real estate shares (I AM 1.58%)And Preservation of life (LSI 0.93%).
The chart below shows that the stock price of each stock has dropped dramatically and remains below that of the mistreated as well. S&P 500. But each also shares long-term buying and holding characteristics, including strong competitive positions, durable demands, expanding portfolios, and the ability to raise rent to increase cash flow in the face of inflation.
They also have excellent record of shareholder returns. Check the difference in the chart below once dividends have been taken into account. Over the past five years, resisting market volatility and letting dividends do the heavy lifting – my plan here – has turned into pretty impressive long-term returns.
A strong second quarter for the ARE
As you can see, Alexandria is lagging behind, but this bureau of life sciences REIT followed the broader market until its recent faint and its current yield of around 3.1% is well above 1.7. % of the S&P 500.
Additionally, the company posted strong second quarter results on July 25, spurring a share price increase of around 4.5% over the next two days. Highlights from earnings included a 33.9% increase in cash-based rents, the highest quarterly increase in its history. Leasing activity was the third highest ever recorded by Alexandria. Revenue increased 26% year-over-year and operational funds (FFOs) for the first half of 2022 were 8% higher than the same period last year.
The company has 7.8 million square feet of new space under construction or in the process of commencing. Of that, 78% are already leased in a portfolio with a tenant list that includes many of the largest biopharmaceutical companies in the industry. Revenue growth is expected to be accompanied by dividend growth that the company expects to continue.
Alexandria has increased its dividends by 6% in the past four quarters and its FFO payout ratio of 56% in the second quarter “allows us to continue sharing the growth in cash flows from operating activities with our shareholders, while maintaining a significant stake for reinvestment, ”the company said in its second quarter earnings announcement.
A great deal in small warehouses
Terrain Realty is an industrial REIT specializing in small warehouses, with approximately 250 buildings and 42 upgraded lots leased from approximately 570 clients in six major coastal markets. The strategy is to capitalize on the demand for logistic space in buffer locations near major seaports, airports and highways in markets with decreasing supply for such niche spaces.
Land quickly expanded its portfolio, adding 10 second-quarter properties in locations that include just off I-405 in Redmond, Washington, adjacent to a New Jersey Turnpike exit in Newark and close to Los Angeles International Airport.
The company has been raising its dividend for 10 consecutive years and now produces around 2.3%, with a payout ratio of around 73% based on cash flow. Analysts rate the stock as a moderate buy and give it a consensus price target of around $ 74, which would be a nice recovery from its current roughly $ 60 per share.
A lot of life is left in Life Storage
Life Storage is a major player in the self-storage industry, with over 1,100 facilities in 36 states, including the locations it owns and operates and a growing third-party management platform. The latter should help the company continue to be a strong competitor in this sector, with its relatively low entry cost.
Another selling point is that such monthly lease businesses can quickly raise rents to counter inflation. The demand for self-preservation grew during the pandemic, and inflation and recession could support the popularity of that option when things outweigh the space for millions of Americans.
In the first quarter, Life Storage grew a third FFO over the prior year period and added 18 stores to its proprietary portfolio and another 25 to its management platform. In July, the company increased its quarterly dividend 8% from the previous quarter to $ 1.08 per share, a 46% increase from last year’s quarter.
The dividend announcement included upbeat words from CEO Joe Saffire: “Our team and platforms are well positioned to continue generating strong cash flow to invest in our technology ventures, operating platforms, properties and people, while also returning capital. to shareholders consistent with our rapid growth Core FFO per share. We look forward to continuing to deliver attractive total returns for shareholders. ”
And I think I can look forward, with reasonable optimism, to seeing this piece of my portfolio increase the share price and total return in the months and years to come as well.
Marc Rapport has positions in Alexandria Real Estate Equities, Life Storage Inc and Land Realty. The Motley Fool has locations and recommends Terrain Realty. The Motley Fool recommends Alexandria Real Estate Equities and Life Storage Inc. The Motley Fool has a disclosure policy.