Real estate investment trusts (REITs) are popular vehicles for protecting principal while gaining some interest, and maybe even growing that principal, too. REITs are required to pay out at least 90% of their income to remain REITs, but they have to have income to pay out, of course, and they’re not all the same. While all working to sustain a predictable cash flow -- when a pandemic doesn’t intervene -- REITs vary in portfolio composition as widely as they range across multiple business verticals.
Choosing one, two, or a portfolio-full depends on your comfort level with each REIT’s business model and their performance, as well as how much you want to push risk for yield.
What we looked for in our March buy candidates are three REITs that solidly beat the FTSE All Equity REIT yield of 3.46% for February and offer enough diversity that they can probably sustain some interest rate hikes and other market roil respectably well, too.
They are Starwood Property Trust (NYSE: STWD), Global Net Lease (NYSE: GNL), and Gladstone Commercial (NASDAQ: GOOD).
Starwood Property Trust
Starwood Property Trust is a Greenwich, Connecticut-based mortgage REIT (mREIT) with a portfolio of more than $17 billion diversified into four segments: commercial and residential lending, infrastructure lending, investing and servicing, and property business.
Starwood calls itself the largest of the commercial mREITs and went public in 2009 as the largest blind-pool company ever traded on the NYSE. The trust kicked off 2021 by declaring a first-quarter dividend of $0.48 on March 11. That’s exactly the same payout Starwood has provided every quarter since the first quarter of 2014.
Adding to its Wall Street cred: Starwood is an affiliate of privately held Starwood Capital Group, the private equity giant, which itself just joined with Blackstone Group (NYSE: BX) to buy Extended Stay America for $6 billion.
Starwood stock hit a 52-week high of $24.94 in midday trading on March 16, giving it a yield of 7.73% based on annual dividends of $1.92 per share. Starwood stock had plunged to as low as $7.59 before a sharp recovery that began in January.
Global Net Lease
Global Net Lease is a New York City-based REIT that at year’s end had a portfolio of 306 properties in 48 different industries and 10 countries that it operates on a net lease basis. And how’s this for balance: The revenue flow is 64% domestic and 36% from Europe, as well as 46% office, 49% industrial, and the rest retail.
The company spent $460 million on acquisitions in 2020, it also says in its year-end report, and its property is 99.7% leased, with 99% of the rent collected in the most recent quarter.
Global Net Lease did cut its dividend by 25% in the first quarter of last year but has kept it $0.40 per share ever since. And that cut, as you can see in its dividend history here, followed only three months of $0.533. Before that, the company paid out $0.177 per share quarterly for three years.
Global Net Lease stock was trading at $18.54 per share midday on March 16, giving it a yield of 8.42% based on annual dividends of $1.60 per share. The company’s stock was 4.14% off its 52-week high of $19.34 reached on Feb. 25. Its stock had plunged to as low as $8.77 per share in April before beginning its strong recovery.
Gladstone Commercial is a McLean, Virginia-based REIT that invests in single-tenant and anchored multi-tenant properties it leases to office and industrial tenants.
This REIT is part of a diverse operation that also includes Gladstone Capital (NASDAQ: GLAD), Gladstone Investment (NASDAQ: GAIN), and another REIT, farmland investor Gladstone Land (NASDAQ: LAND).
At year’s end, Gladstone Commercial owned 121 office and industrial properties in 28 states, leased to 107 tenants, with occupancy at 95.3%.The company pays dividends monthly, funding that payout by locking in spreads between long-term debt and cash flow from long-term leases.
A model of consistency, Gladstone Commercial has been paying $0.12515 a share per month since the first quarter of 2020, then $0.125 per month from 2008 through 2019, and then $0.12 a month from 2006 through 2007.
Gladstone Commercial stock was trading at $20.48 per share midday on March 16, giving it a yield of 6.24% based on annual dividends of $1.50 per share. The company’s stock was 2.24% below its 52-week high reached on March 15 of $20.95 after plunging as low as $7.59 this spring before its current recovery.
The Millionacres bottom line
Starwood, Global Net Lease, and Gladstone aren’t the highest-yielding REITs out there, and no one would call them growth candidates -- even among the big family of real estate stocks -- but they do have long records of consistent payouts and yields higher than your average REIT and, well, way more than certificates of deposit or money markets that are paying next to nothing.
There’s some risk, of course, but also the great likelihood of reward quarterly, and in the case of Gladstone Commercial, every month.