The family of industrial real estate investment trusts (REITs) is a diverse group that includes companies with a broad focus -- from general warehousing to cold storage to last-mile e-commerce and more. Nareit lists 14 of them and says as a group, industrial REITs posted a year-to-date total return of 9.81% as of the beginning of December 2020, with an average dividend yield of 2.55%.
Investors can do a little homework and identify strong performers with long-term records of good returns and decent prospects of stock price appreciation with that family and be fairly confident of success. But because we’re here to help, here are two that might bear some immediate attention for what could be rocky days ahead.
Innovative Industrial Properties
California-based Innovative Industrial Properties (NYSE: IIPR) went public in 2016 as the first REIT -- or publicly traded company of any kind – focused on the legal cannabis business, specifically of the healthcare variety. Since then, it has grown rapidly and now operates in 16 of the 35 states where medical marijuana is legal.
At year’s end, Innovative Industrial Properties had leased out 99.3% of its 5 million square feet with a weighted average lease of 16 years, including production and retail facilities among its 63 properties. Along with buying new properties at a rapid clip and leasing them out, this REIT makes hay with real estate-backed loans to legal growers whose lending options are limited because of federal marijuana banking laws.
The company’s performance would make any Silicon Valley start-up proud by nearly any measure, including raising $1.43 billion in capital -- and putting $1.18 billion of it to portfolio growth -- since the initial $61.1 million from its IPO five years ago.
And its revenue has grown strongly and steadily enough to support dividend increases from $0.15 in June 2017 to $1.24 this past December. That gives Innovative Industrial Properties a yield of 2.78% based on an annual dividend of $4.96 per share at a Jan. 11 stock price of $189.83.
Some REITs pay higher yields, and Innovative Industrial Properties stock is close to its 52-week high of $199.35, but there’s just too much wind at its back in terms of its position in the market and the specialized, fast-legalizing marijuana market itself to not consider this stock a buy.
Monmouth Real Estate Investment Corp.
New Jersey-based Monmouth Real Estate Investment Corp. (NYSE: MNR) is interesting for a couple of reasons: It’s been around since 1968 and has built an outstanding record of return on investment, and it’s the subject of an acquisition offer that -- as of Jan. 11 -- is still a couple bucks more than its trading price.
Monmouth focuses on single-tenant, net-leased industrial properties and currently has 121 buildings in 31 states, comprising 24.5 million square feet of space that’s 99.7% leased.
The company says 81% of its revenue comes from investment-grade tenants, including:
Monmouth is currently yielding 4.21% based on a share price of $16.14 on Jan. 11 and an annual dividend of $0.68 per share, including $0.17 paid out on Dec. 15, and it posted 22% in total return to investors in the past year. Total returns of 1,239%, 243%, and 103% over the past 20, 10, and 5 years speak to its long record, as does the fact it’s maintained or increased its common stock cash dividend for 116 consecutive quarters.Monmouth also is working to grow. It says in a recent press release: “The company expects the combination of its two recent acquisitions totaling $170.0 million, a $169.3 million acquisition pipeline, substantial parking expansions currently taking place, and increased occupancy to meaningfully contribute to its earnings per share and cash flow growth in fiscal 2021 and beyond.”
That press release is actually about an unsolicited acquisition offer of $18 a share -- about $3.8 billion -- made in late December from a major shareholder. Monmouth stock has been trading at around $16 to $16.50 a share of late, and its 52-week high is $17.92. The company said it will consider the offer, the second from that same bidder. Whether it sells or continues as is, money put into this stock now should hold up well.
The Millionacres bottom line
Innovative Industrial Properties and Monmouth Real Estate Investment are two very different operations that share membership in a very small segment of the stock market -- industrial REITs -- as well as the potential for outsized performance in the months ahead. Neither is a lock, but nothing is in investing, and there’s a good argument to be made to add both of these to your collection of real estate stocks.