Thanks for the REITs for consideration review. The div yield and forward AFFO multiple charts were a good adder. At this point in time I'm holding AMT and WPC, but several others are on my watch list. PS: Until I read your last sentence I thought you couldn't count :)
Just checked the image. You've got EPS in there instead of AFFO. Need the right earnings metric. Also saw that the table is using book value. These are equity REITs in the United States. That means they report their financials under GAAP. The rules for GAAP make book value meaningless for equity REITs.
We can use book value on mortgage REITs and BDCs. Assets and liabilities are being revalued based on fair market value. Equity REIT assets are gradually depreciated even if the value is soaring higher.
Example: If you owned a 300-unit multi-family building in San Francisco for the last 50 years, that asset value is only going to be a bit over $0 no matter how much cash flow it produces. That makes the book value meaningless. If you sold the property to another investor, they would record the price they just paid you and the asset would suddenly have a much higher value on their books than it did on yours.
Thx for the great list and info. Question ... I have a large (for me) position in EFC (Ellington Financial) and it's done quite well (bought @ $11.74 in late March 2023 and it's now trading at around $13.75; pays a monthly dividend with a 13%+ yield). Yet I rarely see it in "best" lists like this, or analyzed at all, which is disconcerting. Is it a "hidden gem" or a disaster waiting to happen???
Somewhere in the middle. It doesn't trade down to the prices we need to make that bullish call, but it rarely trades up to the bearish range either.
I treat mortgage REITs as primarily short term trades. I want to capitalize a change in the price to book ratio, but a longer holding period increases the opportunity for book value to shift too far. Great if it goes up, but I'm focused on my ability to run the trades and just want management to hold it together while I'm doing that.
I think they have one of the better management teams though, so that's a nice positive.
If you get into active trading, you may want to track AAIC as well. There are some good opportunities to go back and forth with the buyout.
Thx! Your advice is is much appreciated (I was an English major and freely admit I'm very much at the mercy of people who know what they're talking about). I'm in a weird place ... a soon-to-be retiree looking for income with enough $ to invest to do some good but only if I'm fairly aggressive, yet I have a small margin for error. And the money I have to invest came primarily from selling "family land" that my wife inherited (it'd been in the family for generations), so there's the added weight of needing to be a good steward of that. (I invested in CHMI early on for the high yield and know I feel guilty about it ... hanging on with the hope that I can at least break even!)
If the goal is safety, as it sounds, then high yield is a very dangerous place to be. The sectors long term returns are dreadful. We make money by knowing how to trade on the swings.
As you mentioned the emotional burden also, that is another big red flag to investing in the high yield space. It requires the ability to become a bit detached from it. Likewise the emphasis on breaking even after a bad bet indicates a significant emotional role.
Plenty of equity REITs that might fit as part of the portfolio. The mortgage REITs sound like an extremely poor match between your goals and the way the sector performs. Would definitely rethink the strategy.
Again, thx. My other high-yield REIT positions are ABR and BRSP, both of which have done well so far. That said, I've long thought I should a put a sell-price floor under them just above my purchase price to preserve my peace of mind. I also have RNP but it's a different animal, right? As for CHMI, I can afford to wait it out for now (hoping it'll get bought in an M&A :) ). If you don't mind me asking, what equity REITs would you recommend, given my situation? (Ironically, T and VZ - which I thought would be relatively steady - have been my biggest losers other than CHMI.)
I can't know enough about your position to make any personal suggestions. That would move me from financial analysis to advice. I can say that someone with the criteria you've mentioned would probably be best off diversifying among names like the ones listed in this article. Names with much more stable cash flows and a strong business.
Perfectly understandable. If you'll indulge me (and perfectly understandable if this would push the pro-bono envelope too far)...
I'd like to get an overall dividend yield of 5-8% on a $40K portfolio with capital preservation (although at least modest capital appreciation would be great, of course). Now, my relatively large non-REIT positions are:
Thanks for the REITs for consideration review. The div yield and forward AFFO multiple charts were a good adder. At this point in time I'm holding AMT and WPC, but several others are on my watch list. PS: Until I read your last sentence I thought you couldn't count :)
A quick review of the stocks mentioned in the article...
https://drive.google.com/file/d/1C96wQGyx8ddgpUd9-1oZph87EvGBdmH5/view?usp=sharing
Just checked the image. You've got EPS in there instead of AFFO. Need the right earnings metric. Also saw that the table is using book value. These are equity REITs in the United States. That means they report their financials under GAAP. The rules for GAAP make book value meaningless for equity REITs.
We can use book value on mortgage REITs and BDCs. Assets and liabilities are being revalued based on fair market value. Equity REIT assets are gradually depreciated even if the value is soaring higher.
Example: If you owned a 300-unit multi-family building in San Francisco for the last 50 years, that asset value is only going to be a bit over $0 no matter how much cash flow it produces. That makes the book value meaningless. If you sold the property to another investor, they would record the price they just paid you and the asset would suddenly have a much higher value on their books than it did on yours.
Thx for the great list and info. Question ... I have a large (for me) position in EFC (Ellington Financial) and it's done quite well (bought @ $11.74 in late March 2023 and it's now trading at around $13.75; pays a monthly dividend with a 13%+ yield). Yet I rarely see it in "best" lists like this, or analyzed at all, which is disconcerting. Is it a "hidden gem" or a disaster waiting to happen???
Somewhere in the middle. It doesn't trade down to the prices we need to make that bullish call, but it rarely trades up to the bearish range either.
I treat mortgage REITs as primarily short term trades. I want to capitalize a change in the price to book ratio, but a longer holding period increases the opportunity for book value to shift too far. Great if it goes up, but I'm focused on my ability to run the trades and just want management to hold it together while I'm doing that.
I think they have one of the better management teams though, so that's a nice positive.
If you get into active trading, you may want to track AAIC as well. There are some good opportunities to go back and forth with the buyout.
Thx! Your advice is is much appreciated (I was an English major and freely admit I'm very much at the mercy of people who know what they're talking about). I'm in a weird place ... a soon-to-be retiree looking for income with enough $ to invest to do some good but only if I'm fairly aggressive, yet I have a small margin for error. And the money I have to invest came primarily from selling "family land" that my wife inherited (it'd been in the family for generations), so there's the added weight of needing to be a good steward of that. (I invested in CHMI early on for the high yield and know I feel guilty about it ... hanging on with the hope that I can at least break even!)
If the goal is safety, as it sounds, then high yield is a very dangerous place to be. The sectors long term returns are dreadful. We make money by knowing how to trade on the swings.
As you mentioned the emotional burden also, that is another big red flag to investing in the high yield space. It requires the ability to become a bit detached from it. Likewise the emphasis on breaking even after a bad bet indicates a significant emotional role.
Plenty of equity REITs that might fit as part of the portfolio. The mortgage REITs sound like an extremely poor match between your goals and the way the sector performs. Would definitely rethink the strategy.
Again, thx. My other high-yield REIT positions are ABR and BRSP, both of which have done well so far. That said, I've long thought I should a put a sell-price floor under them just above my purchase price to preserve my peace of mind. I also have RNP but it's a different animal, right? As for CHMI, I can afford to wait it out for now (hoping it'll get bought in an M&A :) ). If you don't mind me asking, what equity REITs would you recommend, given my situation? (Ironically, T and VZ - which I thought would be relatively steady - have been my biggest losers other than CHMI.)
I can't know enough about your position to make any personal suggestions. That would move me from financial analysis to advice. I can say that someone with the criteria you've mentioned would probably be best off diversifying among names like the ones listed in this article. Names with much more stable cash flows and a strong business.
Perfectly understandable. If you'll indulge me (and perfectly understandable if this would push the pro-bono envelope too far)...
I'd like to get an overall dividend yield of 5-8% on a $40K portfolio with capital preservation (although at least modest capital appreciation would be great, of course). Now, my relatively large non-REIT positions are:
EPD
MAIN
STLA
T
TEAF
VZ
Do you see any red flags with those?