Investing in a stock with a massive price can be daunting since you may only be able to buy one or two shares. It almost feels pointless, and emotions are a key piece (perhaps the most important piece) of investing. This is why many investors look at lower-price stocks, so they can feel like they own enough shares to be meaningful. If this is something that matters to you, then you should take a look at net lease real estate investment trusts (REITs) VEREIT (NYSE: VER) and STORE Capital (NYSE: STOR) as well as healthcare REIT Healthpeak (NYSE: PEAK). All have sub-$50 share prices and long-term appeal. Here's a quick look at each.
1. Time to start growing again
VEREIT's claim to fame, unfortunately, is an accounting scandal that erupted in late 2014, when the REIT was known as American Realty Capital Properties. To its credit, the board acted quickly and decisively, bringing in industry veteran, and turnaround expert Glenn Rufrano. The new CEO acted quickly, too, setting out plans to which he and his team could be held accountable, including improving the balance sheet, reinstating a dividend, and reworking the portfolio. And, while achieving all of that, the REIT also had to contend with the legal fallout from the accounting issue. At this point, this is all ancient history (in Wall Street time, anyway).
Today, VEREIT is looking to get back on the growth track, with plans to buy between $1 billion and $1.3 billion worth of assets in 2021. It started the year with around $2 billion worth of liquidity, so it has the cash to do it. And, with an adjusted funds from operations (FFO) payout ratio of 50% in the fourth quarter of 2020, there's ample room for dividend growth here. In fact, even after the 20% dividend increase that was announced for the first quarter of 2021, the payout ratio in the fourth quarter would have only been around 60%. If you're looking for a REIT that is shifting toward growth, VEREIT is one name worth looking at closely today.
2. The fire test
STORE Capital came public in 2014, well after the deep 2007 to 2009 recession. It posted solid growth following its IPO, but until 2020 that was all achieved during supportive economic conditions. This is why the pandemic, and its economic impact, was so important here. Basically, STORE Capital has now proven it can muddle through hard times and keep rewarding investors for their commitment. Notably, the REIT increased its dividend in the third quarter last year. It was a token penny a share, but the statement was far more important than the size.
As STORE Capital looks to the future, the focus is again on growth. The plan for 2021 is to buy between $1 billion and $1.2 billion worth of property, with a top-end adjusted funds from operations growth rate of 7%. That's pretty good for a company that's basically looking to be a slow and steady dividend payer. The thing is, STORE Capital works from the bottom up, preferring to originate its own leases, so it is building out a solid foundation. Indeed, rent collections were an impressive 93% in February, a testament to the company's strength. To be fair, this isn't exactly a cheap stock, but if you're willing to pay a fair price for a well-run REIT, STORE Capital is worth a deep dive.
3. Shifting focus
The last name here is Healthpeak, which has made some missteps in the past -- the biggest being holding onto its nursing home assets for too long before spinning them off. However, that event has led to some notable changes, including an increased focus on the medical office and life sciences sectors. These two areas managed to grow for Healthpeak in 2020 even as its senior housing assets struggled, allowing for positive net operating income (NOI) growth for the full year.
In turn, this led to the REIT's decision to slim down yet again, getting out of the senior housing sector and focusing on its best assets: medical office and life sciences. That shifts the company from being a diversified REIT to a focused one, but with office growing NOI 2.2% in pandemic-hit 2020 and life sciences expanding at a heady 6.2% pace, it's kind of hard to argue with the plan. And while the dividend was trimmed because of this move, long-term investors should be thinking about growth in the future given the strength of these two segments. To be fair, 2021 will be something of a transition year for Healthpeak, but that shouldn't stop investors from considering this REIT as it sharpens its focus.
A variety of options
Every investor is different and so is every company, so it's important to match yourself up with the names that fit your particular investment preferences. VEREIT is a good choice for investors who prefer turnaround plays. STORE Capital is really a slow and steady name looking to grow itself into one of the net lease industry's biggest names. Increasingly focused Healthpeak, meanwhile, is narrowing itself to be an office and life sciences specialist, focusing in on some of the best asset classes in the healthcare space. And all three have stock prices that are below $50, so you can easily buy a sizable number of shares.