Harry Domash's Winning Investing



Three REITs Likely To Raise Already High Dividend Payouts

The Fed just raised interest rates by 0.75%, its biggest rate hike since 1994.

Whether that satisfies the market or there’s more bad news to come remains to be seen.

In the meantime, apartment rental rates, already up almost 20% vs. year-ago, appear to still be on the rise.

Thus, profits, already up, are likely headed higher for apartment building owners. Here’s the good news: you can share in apartment building ownership via Real Investment Trusts (REITS).

REITs Are Special

REITs are a special type of corporation that invests in real estate. There are two major categories of REITs; Property REITs and Mortgage REITs. Today, we’ll focus on Property REITs that own apartment complexes.

Look at These Dividends

Several pay dividends equating to substantial 4% to 7% annual yields. But since they’re required to pay 90% of taxable income to shareholders, rising rents are likely to translate to future dividend hikes. even though share prices might turn summersaults.

Zacks Screener Finds Hot Payers

I used Zack’s Investment Research’s free stock screener to find apartment REITs worth considering. I’ll give you the list in a minute, but first I’ll describe how I set up the screen so that you can run it yourself.

From Zacks homepage (www.zacks.com), select Screening and then Stock Screener. My screen uses five different stock selection rules. Zacks organizes its available selection rules into categories such as Company Descriptors, Valuations, etc.

Here Come the Details

Start with “12 Weeks Percent Price Change” and specify “-15” to limit your results to stocks that have dropped at least 15 percent over the past 12-weeks. Here’s how you would specify that rule (Price & Price Changes category): “% Price Change (12 Weeks) <= -15”

Stocks Analysts Like

Stock analysts rate the stocks that they follow into various gradations of “buy,” “sell,” or “hold.” Zacks compiles those ratings using a numerical scale: Strong Buy = 1, Moderate Buy = 2, Hold = 3, Moderate Sell = 4, and Strong Sell = 5. I limited the list to “buy” or “strong buy” rated stocks. In the Broker Rating and Changes category, specify 2.0 or lower (<=2.0) for Current Average Broker Recommendation.

Avoid Cheap Stocks

Although we’re looking for beaten down stocks, the lower the trading price, the riskier the stock. Use the Last Close rule (Prices & Price Changes) to limit your results to stocks trading at $10 or higher (>= 20).

Bigger Is Better

Market capitalization, a measure of company size, is the total value of all of a firm’s outstanding shares. Market-caps range from as low as $30 million or $40 million to as high as $500 billion. Similar to the reasoning for share prices, stocks with very low market-caps are riskier than bigger stocks. Specify a minimum $1 billion market-cap (>=1000) to rule out the riskiest plays.

Focus On Residential REITs

Finally, using the Industry selection rule (Company Descriptors), select “REIT-Equity Trust – Residential.” 

Here are the three REITs that my screen turned up.

•  Amanda Hoffler Properties (AHH), pays dividends equating to a 5.3%yield.

•  Apartment Income (AIRC), pays a 4.6% dividend yield.

•  Spirit Realty Capital (SRC), pays 7.0%.

As always, consider the results of any screen as research candidates, not a buy list. The more you know about your stocks, the better your results.  

published 6/21/22

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