With a 13.92% year-to-date (YTD) return, versus the S&P's 7.72% YTD return, the real estate investment trust (REIT) industry has significantly beaten the overall markets in recent months.
Even the well-performing NASDAQ, with its 12.75% TYD return, trails the REIT industry by over 1%, YTD.
REITs offer real estate investment diversity to investors in lieu of owning physical real estate. This along with their, at times, hefty dividends have helped them to find a place in my mid/long-term portfolio. But as the REIT industry has been performing increasingly well, undervalued REIT investments are becoming fewer and further between; but some still linger.
Below is a list of five currently undervalued REITs, sorted by dividend yield:
1. Chimera Investment Corporation (NYSE:CIM), a diversified REIT, is trading just above a $2.30 support level. The trust hasn't traded below this price for more than a week since late 2008 and appears to be using this price level as strong support. The trust is trading for less than book, with a 0.73 price to book ratio (P/B), yet still produces a strong return on equity (ROE) of 17.75% and, overall, appears undervalued. Chimera Investment Corporation also offers a 15.06% annual dividend, distributed to investors quarterly.
2. Anworth Mortgage Asset Corporation (NYSE:ANH), a diversified REIT, also appears undervalued with a low P/B, 0.93, and a strong ROE of 12.14%. Technically, the trust looks to have broken above resistance at the $6.10 level and has since used this price level as support. The trust is trading a bit above this new support level but looks to be trending steadily and significantly upward. Anworth Mortgage Asset Corporation also offers a 10.73% annual dividend, distributed to investors on a quarterly basis.
3. Crexus Investment Corporation (NYSE:CXS), a diversified REIT, broke above resistance at the $9.50 price level late last year and has since used this price level as support. The trust produces solid returns with a 13.24% ROE while still selling for less than book with a 0.84 P/B. The trust offers a 10.53% annual dividend, distributed to investors quarterly.
4. PMC Commercial Trust (PCC), an industrial REIT, also recently broke above a prior resistance level and has since used this price as support. For PMC Commercial Trust, this new support appears to be at the $7.50 price level, just below its current trading price. The trust also appears somewhat undervalued with a 0.54 P/B and a decent 2.41% ROE. The trust offers an 8.30% annual dividend, distributed to investors quarterly.
5. Franklin Street Properties Corporation (NYSEMKT:FSP), an office REIT, looks to be consolidating near resistance at the $10.75 price level. Whether or not the trust will fully break through this resistance is still undetermined but, fundamentally, Franklin Street Properties Corporation appears slightly undervalued, holding a 0.98 P/B and a 2.08% ROE. The trust also offers a 6.99% annual dividend, distributed to investors quarterly.
(Graphs and info from finviz.com, Yahoo! Finance, and Fidelity.com)