I have always been a yield hog, make no bones about it. As I have gotten older, my thirst for the 11-13% has quenched a bit, I am content with 5-7%. That is typically the dividend range for a well balanced company. I am very wary of unsustainable payout ratios as well, anything under 150% I will consider, anything over I would rather err on the side of caution. My favorite combination is the high yield, solid sheet and attractive covered calls. That is my triple entendre so to speak. I have been reading a lot this week, due to the quiet nature of the markets as we embark on Good Friday and Easter, and have identified 3 companies that I like as an entry point at their current stock price. Take a look...
Armada Hoffler Properties (NYSE:AHH) ($11.16) is a privately owned real estate investment trust. It invests in real estate markets of Mid-Atlantic United States. The firm is involved in developing, building, owning and managing high-quality, institutional-grade office, retail, and multifamily properties. I am going to tell you flat out the stock trades in a tight range of $9.50 to $11.60, this is not a flyer by any means. The current dividend is 6.5%, which was recently increased by 6% in February. What I find so attractive about this REIT is the condition of their portfolio. Take a look at this link, and notice how almost every building is brand new.
Street appeal is HUGE when it comes to retail shopping, plus the mid Atlantic states have been developing at a much more rapid pace than the Northeast, where there is a large concentration of REITS. Some of their tenants are Kroger (NYSE:KR), Dick's Sporting Goods (NYSE:DKS), Target (NYSE:TGT), Weis Markets (NYSE:WMK), DSW (NYSE:DSW), Food Lion, etc. Those are top tier companies and steady rent payers. Armada is also in expansion mode, they have recently partnered to develop a Durham NC $87 million dollar, 27 story building. Durham NC has seen a real estate boom of its own in recent years, the link is below.
Additionally in January they purchased 11 retail centers for $171 million in cash (1.1 million square feet at a 94% occupancy rate)
60% of the stock is held by institutions, and I don't mind the 143% payout ratio on this stock. With a market cap of $500 million this REIT could be ripe for a buyout by a larger Vornado (NYSE:VNO) or another big fish. The buy rating is currently at 1.4 out of 5 with a mean target price of $12.20 from the 5 firms covering the stock. As far as covered calls are concerned it looks like the November $12.50 strike price is paying $.35-$.40. That might not seems like a lot, a 3% premium, but if you can clip that type of extra money off every six months on a stock that doesn't seem to have a big trading range, then 12% a year on your money isn't terrible in today's marketplace. If you are lucky enough to have it run away to $12.50 by November, then you have beaten 95% of all mutual fund managers.
I would start buying at $11.16 and use any dip in share price as a buying opportunity. Good luck.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.