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Investors in these real estate investment trusts benefit from dividends greater than the yields paid by owning 10-year Treasury notes. These REITS are cheap, too, if you can judge by applying classic valuation techniques: each one is now trading below book value.
The catch may be that there’s a lot of debt on the books of these companies. That’s not all that odd given the typical financial structure for real estate investment trusts. Anyone considering these as additions to a balanced, diversified portfolio would want to take a close look.
Here are the REIT’s, all of which trade on the New York Stock Exchange:
Earnings are way off this year: minus 48.7%. The 5-year earnings are off by 7.2%. The quarter-to-quarter earnings are up 183%. Analysts are expecting Ares to show a profit over the next 12 months.
The stock trades at a 10% discount to book. The price/earnings ratio is 9.3. For an NYSE-listed name, it’s relatively lightly traded at about 570,000 shares daily. The dividend yield comes to 8.75%.
Earnings per share this year look good at 22.3%. The 5-year record is a negative 26.6%. The most recent quarter-to-quarter earnings are a very positive 114.8%. The ARMOUR REIT trades a just 74% of book value.
The price/earnings ratio is significantly below that of the market as a whole — and of this sector — at 2.99. The company pays a dividend of 10. 37%. The short float of 5.46% is a bit higher than other similar stocks.
Headquartered in New York, New York, the company’s earnings this year are off by 297%. The 5-year record is down by 31.7%. The latest quarter-to-quarter earnings report shows a gain of 108% and analysts expect a positive 12 months ahead.
MFA is available for purchase at a 15% discount to book. The p/e of 7.84 is well below that of the S&P 500. Investors receive a dividend yield of 6.3%. There’s plenty of liquidity with an average daily volume of 3.56 million shares.
Western Asset Mortgage Capital.
Based in Los Angeles, the company earnings per share this year come in at -516.7%. The earnings over the past 5 years: -13.8%. Analysts expect a positive year coming up. Western Asset can be bought at 81% of book value.
The price earnings ratio is about as low as it can get at 2.12 — a forward p/e is projected to be about 10. A 6.96% dividend is paid. The short float is 4.72%. Average daily volume is 919,000 shares traded.
These are not buy recommendations. What’s interesting is that investors can still find low price/earnings ratios such as these during a period of intense media focus on high p/e tech stocks which pay little or no dividends.
More research would be necessary and not just into these particular stocks but into the nature of real estate investment trusts in general. It would be wise to check with a registered investment advisor about the subject.
Not investment advice. Stats courtesy of FinViz.com.