Real estate and real estate stocks have generally been hit hard during the pandemic. As the economy recovers I expect them to do get better, as real estate generally does. These are REITs I've chosen to accumulate at this time.
What is a REIT?
REIT is an acronym for Real Estate Investment Trust. REITs were created in 1961 by Public Law 86-779 (aka the Cigar Excise Tax Extension of 1960) under President Dwight D. Eisenhower as a way to allow investors to buy a diversified real estate portfolio of income producing properties. Some REITs today only invest in financing and don't hold any actual real estate. REITs get a tax advantage but they have to pay out 90% of their taxable income as dividends which makes them have high dividend yields in general. Dividends are not qualified so investors pay regular income taxes on dividends and won't get the qualified dividend discount.
Why I'm Investing In REITs in 2021
Decades ago, one of my first investments was in REITs. I was interested in Dividend Reinvestment Plans where you can purchase directly from companies that allowed you to purchase fractional shares and being high dividend stocks, REITs were a good choice. Dividends were used to buy more stock. I would setup monthly payments to purchase these stocks. They area a good way to have a diversified investment in real estate and it was easy to invest at the time before brokerages offered features that made direct purchasing more of a hassle..
Real Estate has been depressed in many markets due to the pandemic. Government subsidies have helped people pay their rent, either trough stimulus payments, increased unemployment benefits but eviction moratoriums have put a strain on some landlords. It's a difficult time and REITs have been hit hard.
I don't think we're the type of country that will throw everyone out on the street and during the 2008 financial crisis we saw how much the government is willing to support real estate debt. If the economy doesn't recover and government support dries up they can drop further but I'm optimistic the economy will recover and so will REITs which is why I choose to create a diversified portfolio of REITs.
Because of how important real estate debt is to our economy, if REITs fail, real estate probably has failed and money doesn't matter and it's Mad Max times.
Why not invest in Fundrise or a REIT fund/ETF instead?
Site's life Fundrise are very popular but from what I've seen there are penalties for withdrawing funds in the short term. Given the volatility of today's markets I wanted to invest in assets that I could get out of quickly without penalty if necessary. I also like the security of dealing with publicly traded companies that are subject to SEC regulations.
I chose individual investing instead of a REIT mutual fund or ETF because I'm trying to do more investing myself again. With a number of brokerages now allowing fractional share purchases and dividend reinvestment with no commissions it's easy to set up my own personal mutual fund.
How Am I Investing In REITs?
I'm buying these stocks in Robinhood because it's easy to purchase fractional shares based on dollar amounts and set up dividend reinvestment. I'll be making periodic investments at least once a month, hopefully buying on overall dips. I'm expecting prices to drop slightly from recent highs but eventually start to take off around May 2021.
How are my REIT Stocks doing?
More details follow but here's a summary table showing how their doing and how much a gain or loss if $100 was invested in each REIT.
This is not my actual cost basis as I started buying these stocks before this post and depending when you read this I might have sold some off. You can see if I've posted an updates on my 2021 REIT Portfolio.
REITs to Buy in 2021
These are a list of REITs I'm choosing to invest in. This is what I've decided to do with my money, you should do your own research before investing yours.
Some of these REITs were chosen because they continued to be strong during the pandemic while the majority I'm choosing because I feel their prices are still low and will rebound within 2 years and will have increased yields. My predictions of gains for between -8% to +68% for each stock. My plan is to accumulate them throughout 2021 and I expect prices to continue to drop for a bit. Most are consolidating right now but I expect a move upwards around May. Price and yield information are as of this writing. It's possible they may have a big drop again but I'll continue to buy.
EQUINIX, INC. (EQIX)
Price: $682.39 Predicted: $625 Projected G/L: -8.4%
Dividend: $10.64 Yield: 1.54%
EQUINIX is a technology REIT that primarily builds data centers and has been around since 1998. Since there has been more demand for online shopping and services the stock has been doing well through the pandemic and I actually expect the stock to go down a little. It doesn't have a high dividend yield either but I'm including it for diversification. I may also be a bit biased as there's an Equinix data center near me and during the DotCom era I worked at a startup that housed servers at Equinix.
INDUSTRIAL LOGISTICS PROPERTIES TRUST (ILPT)
Price: $21.98 Predicted: $22 Projected G/L: 0.1%
Dividend: $1.32 Yield: 5.93%
ILPT invests in commercial logistics properties such as warehouses and distribution centers. Their in dozen's of states but most of their presence is in Hawaii. Their share price has done well during the pandemic so I don't expect much growth but their dividend has been strong. The pandemic has accelerated online shopping and since that was already the trend I expect it to stay strong.
CROWN CASTLE INTERNATIONAL CORP (CCI)
Price: $153.06 Predicted: $155 Projected G/L: 1.3%
Dividend: $5.32 Yield: 3.45%
CCI is another technology REIT that owns, operates and leases wireless towers and cells. This has also been doing well during the pandemic but it does pay a good yield that has consistent growth.
APARTMENT INCOME REIT CORP (AIRC)
Price: $36.9 Predicted: $45 Projected G/L: 8.4%
Dividend: Unknown
Recently Tesla (TSLA) was included as part of the S&P 500 and Apartment Investment and Management Co (AIV), also called Aimco, was removed because it's the S&P 500 not S&P 501. Aimco split 90% of it's properties into AIRC and after the split it was too small to be included in the S&P 500. Since it's a new company dividend information is unknown but I'm optimistic based on the numbers of the prior ticker.
GAMING AND LEISURE PROPERTIES INC (GLPI)
Price: $41.22 Predicted: $45 Projected G/L: 9.2%
Dividend: $2.40 Yield: 5.77%
GLPI owns dozens of casino properties throughout the US, operating 2 of them (Hollywood Casino Baton Rouge in LA and Hollywood Casino Perryville in MD.) They own a few Ameristar, Hollywood and Tropicana casinos, most of which are leased to other companies, including Penn National Gaming which GLPI actually spun off from. It didn't take them long to recover from the pandemic drop and they have done well in the past. Including a leisure REIT helped balance this portfolio and GLPI looked like a good choice. It has done well and has a good yield.
LAMAR ADVERTISING (LAMR)
Price: $82.20 Predicted: $95 Projected G/L: 15.6%
Dividend: $2 Yield: 2.41%
LAMR is an advertising REIT that owns billboards, transit benches and shelters and other advertising assets throughout the US. The pandemic didn't effect the stock price as much and it's been doing well. The dividend however did decrease so I expect it to rise along with continued growth of the stock price.
WP CAREY INC (WPC)
Price: $66.37 Predicted: $80 Projected G/L: 20.5%
Dividend: $4.18 Yield: 6.27%
WPC is a commercial REIT that invests in commercial real estate it then leases on a long-term basis to companies. This segment that has been hit hard during the pandemic as many companies have their workforces working from home. The work-at-home model may continue even after the pandemic as some academics have been recommending it for a while. Companies were forced into it to keep their employees safe and to abide by government restrictions to curb the spread of COVID-19. A lot of workers are enjoying working at home but we're probably going to see workers returning to their cubicles eventually. The company has been doing okay, even during the pandemic and their dividends have continued to increase.
WELLTOWER, INC (WELL)
Price: $61.18 Predicted: $75 Projected G/L: 22.6%
Dividend: $2.44 Yield: 3.89%
WELL is a healthcare REIT that invests in senior housing, assisted living, post-acute facilities and medical office buildings as well as some hospitals with properties in the US and abroad. While they've done well in the past the pandemic has depressed their price a bit. WELL took a big hit but has been recovering slightly and I feel there is still more room for the price to rise. Their dividend shrunk about 30% since the pandemic and as things improve that should hopefully increase as well.
MID-AMERICA APARTMENT COMMUNITIES (MAA)
Price: $124.21 Predicted: $155 Projected G/L: 24.8%
Dividend: $4.1 Yield: 3.19%
MAA is a residential REIT that invests in apartment buildings primarily in Southeast and Southwest US. A lot of my residential REIT picks were focused on the northeast and northwest which wanted me to find some diversification in location. MAA has had strong performance with a good dividend that has grown even during the pandemic.
ESSEX PROPERTY TRUST INCORPORATED (ESS)
Price: $231.28 Predicted: $315 Projected G/L: 36.2%
Dividend: $8.31 Yield: 3.55%
ESS is another residential REIT that invests primarily in apartments in California and Seattle Washington and does own one office building. Some of their San Francisco properties may lose value if companies continue to let workers work from home and workers move further away to cheaper areas but they appear to hold a large and diversified collection of properties. The stock has been doing well until the pandemic and has been recovering recently. I expect it to continue to recover.
EQUITY RESIDENTIAL (EQR)
Price: $58.05 Predicted: $80 Projected G/L: 37.8%
Dividend: $2.41 Yield: 4.14%
EQR invests in apartments in Southern California, San Francisco, Washington, D.C. New York City, Boston, Seattle and Denver. EQR is one of the largest owners of apartments in the United States according to their 2019 10-K. They're heavily in areas where work-at-home policies may be reducing demand and rents. If people return to working in offices in large cities EQR will have a nice recovery.
ALEXANDER'S INC (ALX)
Price: $266.33 Predicted: $375 Projected G/L: 40.8%
Dividend: $18 Yield: 6.66%
If you're over 35 and lived in the NYC area you probably remember shopping at Alexander's. ALX is what's left of Alexander's department stores. They have actually been doing pretty well since the store closures. They own retail, residential and mixed use buildings including the Rego Park II shopping center and the Alexander Building at 731 Lexington Avenue which is a mixed-use building. Vornado Realty Trust (VNO) is one of the major owners, and managers of ALX which made me feel better about it. I think I just wanted to own some iconic NYC real estate and ALX looked better than Empire State Realty Trust (ESRT) plus an interview with the CEO of ESRT kind of turned me off. ALX's dividend has been pretty consistent even during the pandemic.
UNIVERSAL HEALTH REALTY INCOME TRUST (UHT)
Price: $64.83 Predicted: $95 Projected G/L: 46.5%
Dividend: $2.78 Yield: 4.26%
UHT is another healthcare REIT but it hasn't recovered as much as Welltower (WELL) has. They own medical office buildings, acute care hospitals, a behavioral health are hospital, ambulatory care, a rehabilitation hospital and childcare centers. You'd think with so many people getting sick, this type of stock would be doing great but that's not necessarily the case.
SIMON PROPERTY GROUP (SPG)
Price: $83.14 Predicted: $125 Projected G/L: 50.3%
Dividend: $5.2 Yield: 6.01%
SPG might not have made my list based on my technical analysis but there was one factor weighing very heavily in the inclusion into my portfolio. SPG, or the owner I forget which, was a major contributor to Joe Biden's 2020 Presidential campaign. I'm quite cynical and not oblivious to how the world works so I expect them to do well. The stock hasn't been doing great since 2017 but it started out pretty good.
I like $MAC too.
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