Global Net Lease (NYSE: GNL) is what its name implies: a real estate investment trust (REIT) that gets the income it passes on to investors from a portfolio of primarily single-tenant, net leased properties across the United States and Europe. (That’s only two out of seven continents, but close enough to be “global” here.)
GNL stock is also down right now. In late-day trading on Sept. 15, it was at $16.66 a share, 17.2% off its 52-week high of $20.12 it hit on June 15, and well off its all-time high of $27.96 from June 2, 2015.
There are certainly hotter real estate stocks available right now, but as an owner of GNL, I just don’t think it’s time to sell. At least not now.
No bell that rings 'sell' for me, at least not now
Here’s the thing: GNL is yielding 9.59% at $16.66 a share, and it’s averaged $17.66 a share for the past 52 weeks. Based on a 12-month dividend of $1.60 a share, that’s still a yield of 9.06%.
That kind of payout is more like mortgage REIT territory. And it’s good enough for a year-to-date annual return of 17.14%, according to Nareit.
GNL’s portfolio of 311 properties is a mix of 134 office and industrial corporate tenants in 10 different countries and 48 different industries.
For comparison here, Nareit says the 20 REITs it classifies as office were yielding an average of 3.47% with a year-to-date return of 16.34%, and its grouping of 13 industrial REITs was yielding 2.05% with a year-to-date total return of 31.60%, both as of Aug. 31.
GNL has paid $0.40 a share for the past six quarters. Although that’s a decline from the $0.5325 a share it had paid for the three quarters prior to that, the company did pay at that rate – mostly at $0.1775 a share per month before it went quarterly in mid-2019 -- dating back to 2015.
Of course, the algebra here all changes if the company cuts its dividend again. But right now it appears the numbers don’t make that appear imminent. For instance, in the second quarter, GNL reported it grew adjusted funds from operations (FFO) to $44.0 million from $35.4 million in 2Q20 while distributing $38.1 million to shareholders.
That’s generous but not alarming, it feels like, and that mix of proven performance and geographic and tenant diversity -- thus exposure to different markets as they go through their own cycles -- helps give me confidence to continue as an investor in this New York-based REIT.
Diversity in a growing portfolio: a good thing, as long as it keeps yielding dividends
In this case, that geographic diversity now includes an office building in the Channel Islands, that British territory off the coast of Normandy. GNL said Sept. 9 that it paid $76.5 million for Trafalgar Court in Guernsey, for what it called a premier office building occupied by two tenants with an average of 9.3 years left on their leases.
That’s in addition to the acquisition of the Woking, Surrey, England, headquarters of the McLaren Group of auto racing fame among six properties GNL has bought for $326.3 million already this year.
With a forward pipeline that includes $130.1 million for seven more properties, GNL said it plans to finish 2021 with $465.4 million in closed or contracted acquisitions here and abroad with average remaining leases of 15.9 years.
The Millionacres bottom line: I think I just talked myself out of selling!
When I see a stock down 10% or more in a market where there are so many strong gainers, that red “ink” on the screen really stands out.
Plus, it’s well established that chasing yield can be a risky business and that there’s more to a stock than its payout, but GNL doesn’t look like a yield trap, and I’m at that tender age where Medicare has become a reality. I now value income as much as stock price appreciation, in some cases more.
That said, I bought GNL in a few purchases last April and May at about $18.50 to $19.50 a share, so I’m definitely taking a loss if I sell it now. But then I could sell it and write it off against any capital gains I declare come tax time. Of course, that could mean selling something else I want to keep, too!
I think I’ll hold.