RQI: Discount Tightens - Still A 'Buy' For A Quality REIT Play

Summary

• RQI's valuation has changed quite a bit from when we last covered the fund at a nearly 15% discount.
• The fund is still heavily invested in areas of the REIT market that aren't directly impacted by Covid-19.
• If you are lacking exposure to REITs that should continue providing strong cash flow and growth potential, RQI might be an income investors dream.
• Looking for more investing ideas like this one? Get them exclusively at CEF/ETF Income Laboratory. Get started today »

Written by Nick Ackerman, co-produced by Stanford Chemist

Cohen & Steers Quality Income Realty Fund (NYSE:RQI) gives investors exposure to a significant portion of the REIT market. Within their portfolio, they hold some of the highest growth prospects. These areas are less impacted by what the COVID-19 pandemic might be doing to the other areas of the REIT space in; lodging, retail and office REITs. Those are the areas that are being hit the hardest. RQI's focus on infrastructure, healthcare and data centers has meant RQI has the composition to weather the storm.

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RQI's investment objective is to provide a "high current income." They also have a secondary investment objective of "capital appreciation." They will invest in "real estate securities including common stocks, preferred stocks and other equity securities of any market capitalization issued by real estate companies, including real estate investment trusts (REITs) and similar REIT-like entities."

REITs have been historically strong performers. As real assets continue to be an essential part of life - no matter how much we transition to a digital life. Infrastructure continues to be an attractive way for not only strong cash flows from REITs, but also a growing area of the market. The "work from home" and "work from anywhere" culture is certainly helped by the latest pandemic. That's why areas like the tower REITs and data center REITs continue to play an integral part in our lives.

The fund has an expense ratio of 2.17% when including leverage expenses. When taking out those interest expenses we arrive at a reasonable ratio of 1.26%. The fund is also quite large as well at $2.2 billion in managed assets - this can provide for plenty of liquidity for most retail investors. They last reported that 24.2% of their portfolio is attributed to leverage.

Analyst’s Disclosure:I am/we are long RQI. 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.

This article was originally published to members of the CEF/ETF Income Laboratory on August 18th, 2020.