Real estate investment trusts (REITs) are often seen as an alternative to savings, bonds, and CDs, which pay a set return that has been low to nil for years now.
While they do come with market risk, many offer pretty handsome returns that, while not eye-popping -- especially when you compare them with high-flying stocks -- can provide a steady, decent income.
I used a stock screener to look for REITs currently yielding between 5% and 8%. There certainly are a number of them with higher yields, but those are mostly mortgage REITs (mREITS).
Nothing wrong with those, of course, if they're right for you. But I wanted to focus this time on REITs that own and/or operate commercial real estate in segments and markets that are either essential or seem like it (ah, the appeal of working downtown).
I also picked three that I hadn't looked at before and am now considering buying myself. Here are my picks.
Alexander's Inc. (NYSE: ALX) leases, manages, develops, and redevelops properties in and around New York City. And since its activities are conducted through its manager, Vornado Realty Trust, it's kind of a REIT within a REIT.
Currently, Alexander's has a concentrated cache of office, retail, and residential properties that includes 731 Lexington Avenue office and retail (including Bloomberg's world headquarters) in Manhattan, the Rego Center retail and apartment tower complex in Queens, and retail properties located in Flushing, New York, and Paramus, New Jersey.
In the company's second-quarter earnings call, chairman and CEO Steven Roth extolled the sharp recovery and record prices for Manhattan real estate, including a two-floor, 12,000-square-foot condo at 220 Central Park South that just sold for $13,000 per square foot. Big tech interest in the central business district, including from Facebook, also has reignited.
Alexander's stock was trading at $269.57 per share midday on Oct. 7, compared with a 52-week high of $308.39 on March 18 and a 52-week low of $233.70 from last Oct. 28. That was good for a yield of 6.68% based on an annual dividend yield of $18.00 per share. The company has been paying out at $4.50 a share per quarter since January 2018.
Getty Realty Corp.
Getty Realty Corp. (NYSE: GTY) has a well-established spot in a steady, nonglamorous but very reliable niche: convenience stores, gas stations, oil change places, car washes, and other single-tenant automotive-related businesses.The company's portfolio comprises about 1,000 properties in 35 states and Washington, D.C., with about 20% of that business in its home state of New York and the rest primarily in the Northeast and Mid-Atlantic states.
Getty Realty is continuing its investment in this niche, reporting in its Q2 earnings call that it had bought 60 properties year to date. Those properties include 46 Valvoline-branded oil change centers in Q2, primarily around Detroit, Grand Rapids, and Lansing, Michigan, and nearby Toledo, Ohio. These are triple net lease properties with the rent guaranteed by Valvoline. They also bought three brand-name car washes in Cincinnati.
Getty stock was trading at $30.78 midafternoon on Oct. 7, compared with a 52-week high of $34.21 from June 14 and 424.87 from last Oct. 21 for a 52-week low. The stock was yielding 5.1% at that price, and Getty had paid $0.39 per share for the past three quarters after raising the dividend by 5.4% from the $0.37 it had paid for the previous three quarters. There were similar dividend hikes each year from 2017 to 2019.
National Health Investors
National Health Investors (NYSE: NHI) is a Tennessee-based provider of sale-leaseback, joint venture, mortgage, and other types of financing to senior housing and medical facilities -- including skilled nursing and medical office buildings and specialty hospitals -- with a portfolio of about 235 properties in about 35 states.
Beset by the pandemic's multiple effects on such essential businesses that normally profit from an aging population with growing medical needs, this healthcare REIT has recently cut its payout. The company had been paying a steadily escalating dividend -- from $0.95 in March 2017 to $1.102 this past March -- before cutting it to $0.90 for that past two quarters. But it still pays well.
In its Q2 earnings call in August, NHI president and CEO Eric Mendelsohn pinned the cut on issues at its assisted living, memory care, and independent living properties, primarily occupancy shortfalls and higher costs from staffing troubles.
"By rightsizing the dividend, we have sufficient capacity to assist our partners through the recovery while maintaining our balance sheet strength. As we rebuild NOI, we expect to return to dividend growth," Mendelsohn said.
NHI stock was at $52.64 in afternoon trading on Oct. 7, just off its 52-week low of $51.78 from Oct. 6 and well down from its 52-week high of $78.56 from March 15. So, if you like this stock, that should look like a chance for capital appreciation going forward while enjoying a current yield of 6.80%.
The Millionacres bottom line
Alexander's, Getty Realty, and National Health Investors are in very different businesses. Still, each has a strong portfolio in its specialized segment and, despite their struggles, presents reasonable expectations for continuing decent payouts. I'm going to look a bit deeper and may yet pull the trigger on one more of these for an October buy.