I'm trying to take advantage of today's "fiscal cliff" sell-off by adding to my income portfolio. One area I like is some of the under-the-radar real estate investment trusts (REITs). Some of these plays provide good yields, and still have solid prospects if real estate continues to improve. I like the smaller REITs that have not had the large run-ups like most of the larger REITs. Here are two high yielders with small market caps. They both sell in the $5 to $6 price range, and get little analyst coverage.
Arbor Realty Trust, Inc. (ABR) operates as a REIT. The company invests in multi-family and commercial real estate-related assets using a variety of financing and equity products.
Four reasons ABR could be good income portfolio addition at $6 a share:
- It just reinstated a dividend this year after a four-year hiatus because of the financial crisis. It has already raised the dividend payout twice this year, and ABR yields 7.4%.
- Several Insiders have bought over 150,000 shares over the last seven weeks.
- Deutsche Bank just initiated the shares as a "Buy" with a $7.50 price target.
- ABR sells at just 80% of book value. It also has produced positive operating cash flow for three of the last four quarters, despite a net income loss over the last year.
Kite Realty Group Trust (KRG) is a publicly owned real estate investment trust. The company owns interests in a portfolio of 60 operating and redevelopment properties totaling approximately 8.9 million square feet, and an additional two properties currently under development totaling 0.6 million square feet.
Four reasons KRG is a good income play at just under $5.50 a share:
- I have owned this stock since the second quarter. It continues to improve the leasing rate at its properties (over 93% now). It just signed The Fresh Market (TFM) to long-term leases for two of its properties.
- Revenue growth is expected to grow over 12% in FY2013 after being basically flat this fiscal year and as new properties come on-line.
- KRG yields 4.5%, and I would expect it to raise its payout next year as those additional revenues/cash flow comes through.
- The stock sells for a reasonable 12x forward earnings given its dividend yield, and it has a stable of high quality tenants (PetSmart, Publix, Target, etc.) for the majority of its leases.