Top 10 REIT Performers for 2016

0
41

The yield is the most important factor in determining the price of a stock. A security that offers the highest yield overall is the most attractive.

In contrast, when the stock’s yield becomes too low, buying stops. This is the tipping point, and stock prices begin to fall.

The real draw to a company’s dividend is its past performance. While the current yield is not indicative of profitability, it does tell us a lot about the company’s future dividend performance.

Forbes Real Estate Investor

Brad Thomas, a veteran real estate investor Forbes Real Estate Investor , will help you earn a steady income.

It is obvious that a higher dividend will cause the stock price to rise in order to reflect this increase in value. However, a decrease in dividends will result in a stock price decline.

The stocks’ dividend performance is arguably more predictable because Real Estate Investment Trusts must pay at least 90% of taxable income as dividends.

Most REITs have commercial real estate that generates consistent rental income through a variety lease contracts. The REITs’ cash flow provides a high degree of predictability and transparency in relation to future dividend increases.

An investor could own shares in Starbucks(SBUX), but he or she will need to rely on company forecasts as well as a range of other factors to predict dividend growth in 2016. An investor who has a building that Starbucks leases can better predict future profits because it is more correlated with the lease contract.

This is precisely why REITs excel at forecasting future dividend growth and profits.

To assess the future performance of a REIT, there are many metrics I use to do my research. Dividend growth is one such indicator.

The historical dividend records of REITs are the first step in the analysis. Is the company reducing its dividend? Does the company have to borrow money to pay the dividend? Is the dividend sustainable?

Many REITs had to reduce dividends in the last recession. I review the performance of these companies to see how they’ve performed since then. Only a dozen REITs managed to increase their dividends in the last recession. These REITs are highly respected for their exceptional risk management and discipline.

A steady stream of dividends is the best way to know if a company generates enough earnings or funds from operations to pay a dividend. A shareholder can be confident that a company’s dividends are increasing and is in good health. Josh Peters explains How to Increase Your Dividends.

A dividend payment is the best sign of corporate strength. The one that has just been raised is the most secure.

This year, I created an article that highlighted the REITs I believe will generate the strongest dividend growth in 2016. Josh Peters explained that dividend increases are the best evidence of dividend safety and that dividend increases send the management the loudest and most clear message.

Here is a list of REITs based upon their 2015 dividend growth record. (note: I exempted STORE Capital as it did not have a full-year of dividend history in 2014).

As you can see, I have ranked these REITs according to their projected dividend growth for 2016. The estimates were based on FAST Graph analyst consensus data.

For the final part, dividend growth forms an integral part of investment analysis. It’s crucial to have companies that provide consistent profit margins over time. Investors will be better equipped to predict the future performance and profit margins of their enterprise if they pay close attention to dividend records and site statistics. Finding attractive dividend-paying stock is just one piece of the puzzle. Buying them is another. For more information, visit my website HERE.

The author holds shares in (EXR), CONE, and (HASI).

Brad Thomas is the Editor at Forbes Real Estate Investor. He also writes for Seeking Alpha and Forbes.com. He is also a regular guest on Fox business. In addition, he is currently working on The Trump Factor about Donald J. Trump. This book will be a game changer, given the depth of Trump’s analysis.

 

LEAVE A REPLY

Please enter your comment!
Please enter your name here