The following real estate investment trusts (REITs) are of interest because each carries a track record not too dissimilar to those considered desirable in Benjamin Graham’s classic “The Smart Investor.” Graham, of course, is considered the father of value investing and greatly influenced Warren Buffett, his student at Columbia University.
Each of these REITs trades at a discount to book value, and each pays some sort of dividend. Obviously, there’s a lot more to consider, but, as a starting point for the serious long-term investor, these below-the-books, dividend-paying REITs may be worth looking into.
Annaly Capital Management Inc. (NYSE: NLY) trades at a 1% discount to book value with a price-earnings ratio of just 2.42 and now pays a dividend of 14.57%. It is a mortgage real estate investment trust whose assets consist primarily of agency mortgage-backed securities and debentures.
The daily price chart for Annaly CapitaI am here:
The price from nearly $7.80 at the start of the year to $5.30 in mid-June is quite high. A rally from June to late July took it back to $7, but selling resumed, taking the REIT back to $6 before some buyers showed up again.
Find out: This little-known REIT has produced double-digit annual returns for the past five years
City office FPI inc. (NYSE: CIO) trades with a very low price-earnings ratio of 1.13 and pays a dividend of 6.9%. The company buys and operates office properties, primarily in the West and Southwest, including cities such as Denver, Dallas and Phoenix. City Office is trading at just 66% of its book value.
City Office REIT daily price chart looks like this:
Note the drop from $20.50 at the start of the year to the recent price of $11.63 – a drop of 43% in about seven months. The good news for City Office REIT is that so far the June low of under $11 holds.
Cousins Properties Inc. (NYSE: CUZ) trades with a price-earnings ratio of 14.14 and pays a dividend of 4.76%. The company owns, manages and develops rental real estate primarily in the southern United States, primarily in Texas and Georgia. It is available for purchase at a 13% discount on book value.
The daily price chart for Cousins Properties looks like this:
That’s a drop from $41 to $26.91 in about 5.5 months, a 34% drop in value. The REIT is still flirting with the low of early September, which is also the low of the year.
Dynex Capital Inc. (NYSE: DX) trades at 79% of book value with a price-earnings ratio of 3.5 and pays a dividend of 10.5%. The Company invests in residential and commercial mortgage-backed securities, primarily of the agency-backed type.
Dynex Capital’s daily price chart looks like this:
This is a big trading range for a real estate investment trust – from just over $13.80 in mid-June through to $16.80 in late July before dropping to 14, $83 in September.
SL Green Realty Corp. (NYSE: SLG) trades with a price-earnings ratio of 10.94 and pays investors a dividend of 7.95%. The company is one of New York’s largest real estate owners and holds interests in approximately 35 million square feet of properties in Manhattan. The REIT is trading at a 33% discount to book value.
This is SL Green’s daily price chart:
Note the significant level of price decline since the beginning of the year until today. The REIT was trading at $81 at the end of March and is now trading at $47.87.
No guarantee exists that any of the dividend yields described in this article will continue as is. Real estate investment trusts can reduce or reduce these payments without much notice.
Looking for high dividend yields without the price volatility?
Real estate is one of the most reliable sources of recurring passive income, but publicly traded REITs are just one option for accessing this income-generating asset class. Check Benzinga’s coverage of private market real estate and find more ways to add cash flow to your portfolio without having to time the market or fall victim to wild price swings.
Latest information on the private market:
Homes arrived expanded its offering to include shares in short-term rental properties with a minimum investment of $100. The platform has already funded over 150 single-family rentals valued at over $55 million.
The flagship real estate fund through Fund raising is up 7.3% year-to-date and has just added a new rental home community in Charleston, SC to its portfolio.
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No investment advice. For educational purposes only.
Charts: Courtesy of StockCharts
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