Harry Domash's Winning Investing


It's Time for REITs

Real Estate Investment Trusts (REITs) typically own real estate properties such as shopping centers, apartment complexes, industrial parks, etc.

These are known as “Property REITs. Another category, “Finance REITs,” invest in loans secured by real estate. 

Last year, the pandemic hit most REITs hard. With many retail stores closed, shopping centers weren’t collecting rents. Same thing for residential properties whose tenants were suddenly unemployed. 

Now, with the economy on the mend, share prices, at least for property REITs, are taking off. In a minute, I’ll describe how to find the strongest players. But first, some things you need to know. 

About REITs

Although they trade like stocks, REITs are different from regular corporations. They don’t pay federal income taxes if they distribute at least 90% of their taxable income to shareholders. Thus, REITs typically pay high dividends.

The bad news is that REIT dividends are mostly taxed as regular income instead of the lower 15%/20% capital gains rate. So it’s best to keep REITs in tax-sheltered accounts.

Finding REIT Candidates

Here’s how to use the free and user-friendly finviz stock screener to find REITs worth considering.

From the finviz home page (https:finviz.com), select screener and then “All” to see the available screening filters. Then use the associated dropdown menus to select search values for the filters that you want to use. Here’s how to set up my REIT screen.

Define Candidate Universe

Start by using the Country filter to select “USA” to limit the field to U.S.-based stocks. Then select “Real Estate” using the Sector filter to pinpoint REITs. Finally, Select “Over 3%”  using the Dividend Yield filter  to limit your list to high dividend payers.

Follow Smart Money

Institutional investors are mutual funds, banks, etc. Specify “Over 60%” for Institutional Ownership and “Positive” for Institutional Transactions to identify which REITs they liked enough to add to already big positions.

Along those same lines, specify “Positive” for Insider Transactions to pinpoint REITs whose company executives and other insiders recently added to positions.  

Then, using the Analyst Recommendations filter, specify “Buy or Better” to limit you list to REITs that stock analysts, who are supposed to know about such things, are advising buying.

Make the Trend Your Friend  

Even for REITs, those with already uptrending share prices are your best bets. Most players use moving averages (average closing price) to determine which way a stock is trending. Stocks trading above their moving averages are said to be uptrending and vice-versa. Use the 200-Day Simple Moving average filter and specify “Price Above SMA. 

Found Five REITs

My screen turned up five REITs when I ran it last week.

Armada Hoffler Properties (AHH): Owns office, retail, and multifamily properties located primarily in the Mid-Atlantic and Southeastern states. 4.5% dividend yield.

Global Medical REIT (GMRE): Owns specialized healthcare facilities that it leases to healthcare systems and medical groups. 5.9% yield.

NetStreet (NTST): Owns single-tenant retail properties nationwide. 3.8% yield.

Alpine Income Property Trust (PINE): Owns single-tenant commercial properties. 5.6% yield.

Simon Property Group (SPG): Owns shopping centers and outlet centers in the U.S., Canada, Europe and Asia. 4.3% yield.

As always, those are my ideas. Do you own due diligence. The more you know about your stocks, the better your results.

published 5/11/21

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