35 'Safer' Dividend Real Estate Equities Have September Cash To Pay But Will They?

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Includes: AGNC, APLE, CIM, CLNY, DX, GEO, GLPI, GMRE, IRCP, IRS, NLY, ORC, RC, SIR, WPTIF, XHR
by: Fredrik Arnold

Summary

WallStars show positive broker-target price-upsides. Top net-gain "safer" Real Estate WallStars WPTIF, DX, XHR, APLE, GLPI, GEO, SIR, CLNY, IRS, & IRCP averaged 38.5% 9/19/18. Three were top yielders.

5 of 93 highest yield Real Estate (RE) sector WallStars were tagged "safer" for dividends because they showed positive one-year returns and free cash-flow yields greater than their dividend yields.

Top 10 "safer" dividend September RE WallStar annual-yields ranged 8.43% to 12.89% from GMRE; NLY, SLD, SIR, IRCP, CHMI, CIM, DX, AGNC, & ORC. Their free cash-flow yields ranged 10.3%-77.9%.

Besides safety margin, Real Estate WallStars also reported payout ratios (lower is better), total annual returns, dividend growth, and p/e ratios, to further gauge their dividend back-up. Total annual returns narrowed the Real Estate field from 93 to 72 by disqualifying those firms reporting negative numbers.

5k invested in the lowest-priced five September top-yield 'safer' dividend Real Estate WallStars showed 52.85% LESS net gain than from $5k invested in all ten.  High price bigger issues led these 'safer' dividend Real Estate WallStars.

Actionable Conclusion (1-10): Analysts Say Top Ten Real Estate "Safer" WallStars Could Net 15% to 131.3% Gains To September, 2019

Three of the ten top Real Estate Wall Stars by yield (shaded in the chart above) were here among the top ten gainers for the coming year based on analyst 1 year target prices. Thus the yield strategy for this Real Estate group was graded 30% accurate by broker analysts.

Projections, based on estimated dividend returns from $1000 invested in the thirty highest yielding stocks and their aggregate one year analyst median target prices, as reported by YCharts, created the 2018-19 data points. Note: one year target prices from single analysts were not applied. Ten probable profit-generating trades projected to September, 2019 were:

IRSA Propiedades (IRCP) netted $1,312.97 based on dividends plus a median target price estimate from five analysts less broker fees. The Beta number showed this estimate subject to volatility 70% less than the market as a whole.

IRSA Inversiones (IRS) netted $655.36 based on dividends plus a median target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 80% more than the market as a whole.

Colony Capital (CLNY) netted $433.66 based on estimates from four analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 35% more than the market as a whole.

Select Income REIT (SIR) netted $342.69, based on estimates from four analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 23% less than the market as a whole.

The GEO Group (GEO) netted $228.70 based on estimates from three analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 20% more than the market as a whole.

Gaming and Leisure Properties (GLPI) netted $119.65 based on a target price estimate from eleven analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 45% less than the market as a whole.

Apple Hospitality REIT (APLE) netted $175.15 based on dividends plus a median of the target estimates from five analysts, less broker fees. The Beta number showed this estimate subject to volatility 37% less than the market as a whole.

Xenia Hotels & Resorts Inc (XHR) netted $167.66 based on a median target price estimate from seven analysts, plus projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 11% under the market as a whole.

Dynex Capital Inc (DX) netted $162.39 based on estimates from four analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 41% under the market as a whole.

WPT Industrial REIT (OTCQX:WPTIF) netted $150.79 based on estimates from nine analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 11% less than the market as a whole.

Average net gain in dividend and price was 38.49% on $10k invested as $1k in each of these ten Real Estate 'safer' dividend WallStars. This gain estimate was subject to volatility 10% under the market as a whole.

The Dividend Dogs Rule

The "dog" title was earned by stocks exhibiting three traits: (1) paying reliable, repeating dividends, (2) their prices fell to where (3) yield (dividend/price) grew higher than their peers. Thus, the highest yielding stocks in any collection became known as "dogs." More specifically, these are, in fact, best called, "underdogs".

Eight Of Nine Industries Put "Safer" Dividend WallStars In The Real Estate Sector

Nine industries compose the Real Estate sector, and eight were represented by the 35 equities whose stock reports showed positive annual returns and margins of cash to cover dividends by this screen as of September 19.

The industry representation broke-out, thus: REIT - Diversified (13); REIT - Residential (3); Real Estate - Services (1); REIT - Healthcare Facilities (3); Real Estate - General (1); REIT - Hotel & Motel (6); REIT - Industrial (3); REIT - Retail (4); REIT - Office (0).

The first four industries listed above populated the top ten Real Estate 'safer' dividend WallStars by yield.

35 of 93 WallStar Real Estate Firms Showed "Safer"September Dividends

Periodic Safety Inspection

A previous article discussed the attributes of 50 top yield and 50 top target gain Real Estate WallStars out of the 93 on this master list.

You see grouped below the tinted list of 35 that passed the Real Estate 'safer' check with positive past-year returns and cash flow yield sufficient to cover their annual dividend yield. The margin of cash excess is shown in the bold face "Safety Margin" column.

Financial expectations, however, are easily over-ruled by boards of directors or company policies cancelling or varying the payout of dividends to shareholders.

For example, two Real Estate firms recently acquired existing firms. NLY bought MTGE and TWO bought CYS. Their dividend issues are up in the air until new dividends are established for both new merger survivors, NLY and TWO. Granted, NLY's case is stronger, but until a new dividend is declared for the newly minted corporate bodies, the issue is in limbo for this dogcatcher.

This article contends that adequate cash flow is a strong justification for a company to sustain annual dividend increases to shareholders.

Three additional columns of financial data, listed after the Safety Margin figures above, reveal payout ratios (lower is better), total annual returns, and dividend growth levels for each stock. This data is provided to reach beyond yield to select reliable payout stocks. Total annual returns limited to positive results narrowed the list by twenty-one for this article. Positive results in all five columns after the dividend ratio is unique as a solid financial signal.

To quantify top dog rankings, analyst mean price target estimates provide a "market sentiment" gauge of upside potential. Added to the simple high yield "dog" metric, analyst mean price target estimates became another tool to dig out bargains.

Yield Metrics Found A Big Disadvantage For Five Lowest Priced Of The Top Ten Yielding WallStars

Ten 'Safer' Dividend Real Estate WallStars stocks per September 19 YCharts data ranked by yield as follows:

Actionable Conclusions: Analysts Predicted 5 Lowest Priced, of Ten "Safer" Dividend High Yield Real Estate Sector WallStars, Could (13)Deliver 12.38% VS. (14) 26.26% Net Gains from All Tenby August, 2018

$5000 invested as $1k in each of the five lowest priced stocks in the "safer" ten Real Estate Sector WallStars were determined by analyst 1 year targets to deliver 52.85% LESS gain than $5,000 invested as $.5k in all ten. The tenth lowest priced 'safer' dividend Real Estate WallStar, IRSA Propiedades Comerciales SA (IRCP) showed the best analyst augured net gain of 131.3% per their targets.

Lowest priced five "safer" Real Estate stocks as of September 19 were: Dynex Capital (DX); Orchid Island Capital (ORC); Global Medical REIT (GMRE); Annaly Capital Management Inc (NLY); Sutherland Asset Management Corp (SLD), with prices ranging from $6.36 to $16.55.

Higher priced five "Safer" Dividend Real Estate stocks were: Cherry Hill Mortgage Investment Corp CHMI); Chimera Investment (CIM); AGNC Investment Corp (AGNC); Select Income REIT (SIR); IRSA Propiedades Comerciales SA (IRCP), with prices ranging from $18.44 to $24.11. High priced big Real Estate equities dominated this month.

This distinction between five low priced dividend stocks and the general field of ten reflects the "basic method" Michael B. O'Higgins employed for beating the Dow. The added scale of projected gains based on analyst targets contributed a unique element of "market sentiment" gauging upside potential. It provided a here and now equivalent of waiting a year to find out what might happen in the market. Its also the work analysts got paid big bucks to do.

Caution is advised, however, as analysts are historically 20% to 80% accurate on the direction of change and about 0% to 20% accurate on the degree of the change.

The net gain estimates mentioned above did not factor-in any foreign or domestic tax problems resulting from distributions. Consult your tax advisor regarding the source and consequences of "dividends" from any investment.

See my instablog for specific instructions about how to best apply the dividend dog data featured in this article, this glossary instablog to interpret my abbreviated headings, and this instablog to aid your safe investing. --Fredrik Arnold

Stocks listed above were suggested only as possible starting points for your "Safer" Real Estate WallStar dividend stock research process. These were not recommendations.

Disclaimer: This article is for informational and educational purposes only and should not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security. Prices and returns on equities in this article except as noted are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding, or selling same.

Graphs and charts were compiled by Rydlun & Co., LLC from data derived from www.ycharts. com; www.finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance. RE Dog housephoto from: adorable-home.com

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.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.