Sweet And Spicy Update Of 16 Equity REIT And 7 BDC And mREITs Carrying 6.8% Average Income Yield

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Includes: APLE, CIO, CLDT, DLR, GAIN, HTGC, IRM, KIM, MRCC, NEWT, NRZ, OHI, SKT, SNR, SPG, STAG, STOR, TPVG, VTR, WPC, WPG
by: RoseNose

Summary

23 RICs are shown with cost/share gain or loss since 2013 when I started investing in them.

They comprise 16.1% of current value and provide about 26% of income from within my 84+ diversified stock portfolio.

The 2 mortgage REITs and 5 Spicy BDCs are in the financial sector, whereas the 16 equity REITs are in real estate.

I chart the P/FFO for the equity REITs, show the NAV and yields for BDCs, and reveal my current planned moves for them all.

This is an update of a December 2016 article when I had 28 RICs and now currently only have 23. RICs are regulated investment companies" which consist generally of real estate investment trusts (REITs), business development comapnies (BDCs), closed end funds (CEFs) and master limited partnerships (MLPs).

In that article I discuss the characteristics of RICs over a normal C-corp stock. I believe an investor, if they understand these differences, can easily invest in the two types for a blended diversified portfolio. I am diversified for the sectors, which I charted in my most recent article here.

Below is a chart I keep in Google Sheets. It shows the current price as of July 15, 2017 and the yield for the dividend shown per year. Next is my cost/share and when I made the first purchase.

Lastly is my gain or loss per share. Since Digital Realty Trust (NYSE:DLR) is one of my first, I have been wheeling and dealing with it since 2013 and have adjusted the cost/share to show it. All of these are in a Roth and therefore experience no capital gains or losses. I do have one preferred holding here: WPGpH, which I recently purchased for almost par or $25.15. It would have become one of my mystery holdings, but The Fortune Teller has revealed it on the free side of SA.

Ticker Name Curr Price Curr Yield divi /yr. My cost/sh 1st Buy My G/L%/sh
eREIT -16- Value
APLE Apple Hospitality (APLE) 18.68 6.42% $1.20 18.79 Sept2016 -0.6%
CIO City Office (CIO) 12.41 7.57% $0.94 12.49 May 2017 -0.6%
CLDT Chatham Lodging (CLDT) 20.25 6.52% $1.32 20.38 Mar2016 -0.6%
DLR Digital Realty (DLR) 112.43 3.31% $3.72 35.47 2013 217.0%
IRM Iron Mt (IRM) 34.78 6.33% $2.20 34.26 Jun 2017 1.5%
KIM KIMCO (KIM) 18.95 5.70% $1.08 20.69 Apr 2017 -8.4%
OHI Omega (OHI) 33.37 7.55% $2.52 33.5 2012 -0.4%
SKT Tanger (SKT) 26.75 5.05% $1.35 30.43 2017 -12.1%
SNR New Senior Ivstmt (SNR) 10.19 10.21% $1.04 9.99 Jan 2017 2.0%
SPG Simon Property Grp (SPG) 160.73 4.36% $7.00 175.56 Aug2016 -8.4%
STAG Stag Industrial (STAG) 27.27 5.17% $1.41 17.38 2015 56.9%
STOR Store (STOR) 23.07 5.03% $1.16 22.16 2017 4.1%
VTR Ventas (VTR) 68.05 4.56% $3.10 58.81 May2015 15.7%
WPC WP Carey (WPC) 67.61 5.89% $3.98 64.62 Feb2015 4.6%
WPG Washington Prime (WPG) 8.83 11.33% $1.00 10.04 Oct2016 -12.1%
WPGpH Wash P pref (WPGpH) 25.33 7.38% $1.87 25.15 Jul 2017 0.7%
mREIT -2-
Mystery Mystery 14.1 7.94% 13.94 Apr 2017 1.1%
NRZ New Residential (NRZ) 15.52 12.37% $1.92 12.62 June2016 23.0%
BDC -5-
GAIN Gladstone (GAIN) 9.44 8.16% $0.77 7.78 Aug2016 21.3%
HTGC Hercules Tech (HTGC) 13.44 9.23% $1.24 13.67 May 2017 -1.7%
MRCC Monroe Capital (MRCC) 15.05 9.30% $1.40 14.89 Nov 2016 1.1%
NEWT Newtek (NEWT) 16.55 9.18% $1.52 12.75 June 2016 29.8%
TPVG Triplepoint (TPVG) 13.04 11.04% $1.44 13.59 Mar 2017 -4.0%

Below is a quick summary of the above sheet with totals.

# means number of companies.

% PV is % by portfolio value and not cost

% P Inc is by total Portfolio Income. The current yield on value for these 23 RICs is 6.77%

#
% PV % P inc
equity Reit
3 H-care 4.6 7.7
13 Other 8.1 10.6
2 m REIT 1.5 3
5 BDC 1.9 4.6
23 Total 16.1 25.9

Let’s talk sweet equity REITs first as I own the most of those. I say sweet because that is a nice rhyme for the pronunciation of REIT. They are also treats as they have usually offer higher dividend yields.

REAL ESTATE – This is the sector where equity REITs now belong after having been moved from the financial sector at the end of last year in 2016.

These sweets maybe subdivided into many types.

Brad Thomas uses 11 within most of his articles and newsletter. Hoya Capital does a wonderful weekly review that uses 13 types.

The chart below shows my holdings using Brad’s 11 types.

REIT TYPE Ticker % P V % P Inc
Residential/Apt
Single Family,student
Manufactured Housing
Retail-
Shopping Center KIM 0.3 0.2

WPG 0.6 1.6

WPGpH 0.1
Mall SKT 0.7 0.5

SPG 0.5 0.4
Self Storage
Triple Net Lease STOR 0.4 0.4

WPC 2.9 4.4
Data Storage DLR 1 0.9

IRM 0.1 0.1
Healthcare OHI 2.4 4.5
MOB, Skilled Nursing, Hosp SNR 0.8 1.9

VTR 1.3 1.3
Office/ CIO 0.1 0.1
Industrial STAG 0.8 1.1
Lodging/Hotel APLE 0.4 0.5

CLDT 0.3 0.4
Specialized
Energy, Timber, Farmland
12.7 18.3

Note I still lack a few types, but I am becoming more diversified with retail malls and shopping centers as my newest holdings, along with triple net, office and data storage as I consolidated out of health care to purchase them.

ANCHORS & BUOYS

Brad in a very recent article titled “Anchors Aweigh” described his Durable Income Portfolio using nautical terms.

Anchor REITs have long term leases and are the most reliable with predictable dividends.

To me this seems just like the SWAN term of Sleep Well At Night, but still, I like being anchored.

He divided the anchor types into the three shown in the chart below.

% SV means % sector value.

These are my particular anchors taken from that article. He did not have IRM, but I added it, anyway. It also is new and rather small.

Anchors % S V
Net Lease WPC 23.2
STOR 3.2
Healthcare VTR 10.5
SNR 6
OHI 19.5
Data/storage DLR 7.7
IRM 0.6
70.7

He wanted at least 50% in these type holdings and I am very pleasantly surprised to see mine qualifies in that regard with 70+%.

The other type he called Buoys as they react more to external events because of shorter leases, such as hotels that have the shortest leases. He also has retail here and mentioned purchasing the more quality holdings such as SKT and SPG. I therefore have ~30% of my holdings in these buoys.

EVALUATION

Equity REITs are evaluated by funds from operations, called FFO. Another metric is AFFO or Adjusted FFO. The Price/FFO is key and the lower the better.

My chart for all types of RICs follows - or just fast forward to the end to see the metrics and what type of moves Rose is doing with these.

FINANCIAL Sector RIC

Mortgage REITs

Two types that I know about and are agency or commercial mortgage companies - some are hybrid.

I own only two and one is a mystery as it is from a paid service by The Fortune Teller.

These two make up 1.5% by portfolio value and 3% by income.

Both are mostly commercial - hybrid types with holdings in real estate property as well.

These seem more stable for price in rising rate times.

Ticker % P V % P Inc
mortgage REIT Mystery 0.8 0.9
NRZ 0.7 2.1
1.5 3

I have nice capital gains on NRZ and mystery is new.

Evaluation information follows soon.

BDC or Business Development Company

It has been suggested by BDC Buzz, one of my favorite contributors and a colorful chart maker, to hold a basket of BDC holdings. He likes a minimum of 5 for diversity. Here are my 5 for the basket:

Ticker % P V % P Inc
BDC GAIN 0.4 0.8
HTGC 0.1 1
MRCC 0.4 0.8
NEWT 0.7 1.6
TPVG 0.2 0.4
1.9 4.6

As you can see from 1.9% of value, which is not much, a little goes a long way for 4.6% income. Most average BDCs have a yield of 7-10% or more depending on their current price.

If you are wanting good income and not necessarily capital advancement, but do know it can be done, these are the investment vehicles for just that.

One younger investor, Nick Mackintosh, in his article here, discusses his switch from dividend growth investing to RIC investing. He explains very well the definitions, as well as the numerous contributors of both investing types. He has started a marvelous portfolio of RICs too, including CEFs. I recommend it as a great read and then to follow along on his adventures, as he is becoming easily someone to learn from. High Yield Investor Joe just retired by using such a plan, and I enjoy his articles as well. All of these contributors, and of course The Fortune Teller with the A-team, have been instrumental in me establishing most of these RIC investments.

Here is a link from Closed-End Fund Advisors that tracks the net asset value, or NAV, for BDC investments. It also gives the current price and much more. Some current prices are above NAV, like Main Street Capital (NYSE:MAIN) and HTGC, some sell at it as many of mine do. Those that sell at a discount are where the fun begins - as it must be determined at what discount and risk one might want to take. I suggest reading and learning from many of the contributors on SA, it seems to help me. The accounting analyzing skills of Scott Kennedy are amazing, and he puts in bold the buy, sell and hold prices and I am thankful for him offering it for free. Here is his most recent article analysis for MAIN.

ROSE RIC MOVES

Add, Buy, Hold, Opt or Watch.

Opt means I am doing Options on that particular stock.

Covered Call Option means to sell shares that I own.

  • DLR is for a strike price of $125. It is not for all of my shares and ends August 18.
  • VTR Call @ $70 strike is for only some of my shares, not all and ends in November.

Cash Covered Option to B or Buy means I sold a put.

Opt B appears with the strike price. I also have some other puts not shown, as I do not own any shares as yet. They are NNN @ $35 and NSA for 22.50.

Two stocks had unavailable 5-year P/FFO from F.A.S.T. Graphs for which I have a subscription and obtained the data.

For the equity REITs I have put in bold the Price/FFO that is lowest. This shows the trend for stock price in relation to the 5-year P/FFO. In general, the lower the P/FFO the more value you are getting. Sometimes a sector comparison is also advised to see if it resides within those parameters as well and how it compares to its peers. The holds true for each and every stock in my opinion and belongs with due diligence.

Most analysts such as Morningstar or Value Line do not cover most RICs and thus I am showing the analyst projection for price from Nasdaq and Yahoo Finance.

Note the * on three of the Nasdaq prices. I placed it to advise that I feel these holdings are speculative in nature for many reasons.

I also want you to know this is only what I am doing and not what you should do. Investing is individual and you must always do your own due diligence and operate from your own plan.

TICKER P/FFO 5yr P/FFO Nasdaq $ Yahoo Fin Rose move
APLE 10.6 12 20 19.9 Add <18.5
CIO 11.8 14.5 * 14.9 Add <12.2
CLDT 9.1 11.7 19 19.75 Hold
DLR 19.1 14.8 119 117.88 Opt sell 125
IRM 17.2 15.6 34.78 36.8 Opt B 32.50
KIM 12.5 16.2 23.5 23.34 Opt B 17.50
OHI 9.8 11.5 33.5 32.31 Hold
SKT 11.2 17.7 31.5 29.46 Opt B 25
SNR 8.3 10* 11.5 Hold
SPG 14.8 18.9 198 192.3 Watch to add
STAG 16.6 14.3 26 27.18 Hold
STOR 14.3 16.6 25.25 26.18 Buy 20
VTR 16.4 15.3 64 63.88 Opt sell 70
WPC 14.4 13.7 69 64.5 Hold
WPG 5.3 6.9 9* 8.3 Watch.
*speculative
TICKER NAV Yield Nasdaq $ Yahoo Fin Rose move
NRZ 12.9 17.5 17.19 Hold
GAIN 9.95 8.2 10 9.67 Hold
HTGC 9.76 9.3 15.5 14.78 Watch
MRCC 14.34 9.3 17.25 17.29 poss add
NEWT 14.31 9.7 18.25 18.1 hold
TPVG 13.38 11 13 13.75 hold

I truly enjoy owning and collecting the dividends from RICs and believe they are safe if you know how to monitor them and understand their basic nature.

Very rarely do any go bankrupt. True, their beta may be more volatile than perhaps some dividend champions, but they offer a lot of reward for income. They can belong as a diversified blended holding in almost any portfolio.

I enjoy blending them into mine.

Have FUN and be Happy Investing.

Disclosure: I am/we are long DLR, VTR, OHI, WPC, APLE, KIM, WPG, SKT, SPG, STAG, STOR, IRM, SNR, CIO, CLDT, NRZ, GAIN, HTGC, MRCC, NEWT, TPVG.

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.

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