Posts tagged with: Real Estate

An Income Opportunity for the Long-Term


Check out the video above, which is from my live stream for traders and active investors, to learn why I like this company and non-traditional REITs in general.

If you’ve followed the live stream lately, you know I’m bearish on the stock market.  Most stocks are priced at lofty valuations right now, and it’s likely we’ll see a hard landing as deflationary pressures resume.  Therefore, I’m currently net short the market.  I’ve sold short more stocks than I own.

Despite the bearish forecast, I’m still on the hunt for long-term portfolio holdings that can give me a reliable yield.  Real estate investment trusts (REITs), with the exception of certain commercial REITs (retail and office buildings), will outperform the market going forward.  I also feel I’m personally underinvested in real estate.  I recently found a company in this space that I liked enough to take a position in: Iron Mountain REIT (IRM).

You may have seen Iron Mountain trucks driving around your town, or their secure storage bins in your office.  This company is in the business of storing, protecting, and managing records, both physical and electronic, for their business clients.  Iron Mountain owns or leases space in over 1,400 facilities across the globe.  They lease this space out to other businesses for storage of their data and records.  They also provide information management services to diversify their revenue base beyond simply lease payments.  What’s more, they’ve picked up some fine art storage facilities to meet the specialized needs of art investors and wealthy individuals.

Document retention is a secure business with good prospects for growth as well.  Companies are required to maintain physical and/or electronic records by law.  Not to mention, it’s a vital part of any firm’s disaster recovery and contingency planning.

This company is more like a traditional stock than a REIT, but it adopted a REIT structure in 2014.  Therefore, it must pay at least 90% of its taxable earnings back to investors as a dividend.  This is great news for investors seeking income.  The dividend yield on IRM is currently 6.2%.

Whenever you see a yield over 5%, you’ve got to do extra diligence to figure out why the yield is high.  In other words, why is the price low when compared against the dividend?  In the case of IRM, I think it is simply because of the company’s high debt levels.  They’ve issued a substantial amount of debt in the last year to finance their international expansion.

I usually avoid highly indebted companies, but I’m not worried about this one because:

  • They acquired another company, Recall Holdings, in 2016.  Recall has a similar business to Iron Mountain, but in Australia.  The integration costs hit earnings in the last several quarters, but Recall will provide significant cost savings for Iron Mountain.
  • Along these same lines, Iron Mountain has been financing international expansion.  This expansion has diversified Iron Mountain’s revenue base, enhancing the stability of the company’s total revenue and net income.
  • The company’s debt is at reasonable rates and its maturities are mostly after 2020, so there is limited risk associated with rolling over the debt at maturity in the event of a near-term credit crunch.
  • A significant portion of the debt is denominated in currencies other than the US dollar.  This reduces the company’s exposure to foreign exchange risk.  If they had financed overseas growth with US dollar-denominated debt, we’d have to worry about a rising dollar making those interest payments more expensive.  Not an issue here.
  • They recently hiked the dividend from 48 cents per share to 55 cents per share, which is a huge increase.  Management would not have done this if they were not highly confident the dividend could be maintained at this level, or grown further.

As long as they don’t start to over-reach in their acquisitions of other companies, Iron Mountain should be exactly the kind of long-term holding I’ve been hunting for.

As with any investment, make sure to review the company’s annual report and other SEC filings to get a good understanding of the company before investing.  Pay particular attention to the disclosures of potential risks in those filings.  You can find investor info for Iron Mountain REIT here.  Just because this company is right for me right now doesn’t mean it is necessarily right for you.

As I disclosed above, I own shares of IRM as of the publishing of this post.  View other important disclaimers on this page.


The Torpedo Trading Live Stream

Watch more live streams like this at https://www.twitch.tv/torpedotrading and interact with me in real-time.  Follow the channel, and you can receive notifications when I go live.

If you miss a stream, highlight clips like this one can be found at my YouTube channel.

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An Income Opportunity for the Long-Term


Check out the video above, which is from my live stream for traders and active investors, to learn why I like this company and residential real estate in general.

If you’ve followed the live stream lately, you know I’m bearish on the stock market.  Most stocks are priced at lofty valuations right now, and it’s likely we’ll see a hard landing as deflationary pressures resume.  Therefore, I’m currently net short the market.  I’ve sold short more stocks than I own.

Despite the bearish forecast, I’m still on the hunt for long-term portfolio holdings that can give me a reliable yield.  Residential real estate is an area that should hold up much better than most commercial real estate (especially retail and office buildings) going forward.  I also feel I’m personally underinvested in residential real estate.  I recently found a company in this space that I liked enough to take a position in: Bluerock Residential REIT (BRG).

This company owns interests in many apartment complexes, most of which are in the southeastern United States.  They also own a bunch of developments that are currently under construction.  Their target areas for investments are premium locations in and around “second-tier cities”: those that are smaller than New York, Los Angeles, etc. but big enough that they are attracting substantial corporate investment and/or residential demand.  We’re talking Austin, Houston, Charlotte, Atlanta, and Orlando, for instance.

The company is structured as a real estate investment trust, or REIT.  Find out more about investing in REITs on this episode of my free investing podcast.

They’ve got several series of preferred stock with different yields and terms attached to them.  I actually chose to invest in the common stock though.  The common stock pays a yield of 9.2%, whereas the preferreds are in the 7%-8% range and two of the three series are priced at a premium over par.

Whenever you see a yield over 5%, you’ve got to do extra diligence to figure out why the yield is so high.  In the case of BRG, I think there are two reasons:

  • They plan to internalize their management in 2017, which may involve an up-front payment.  The managers are currently employed by Bluerock, not by the REIT itself.
  • The recent trend in earnings hasn’t been stellar, but I see this as largely a byproduct of rapid growth.

Upon reviewing the financials, I believe that the majority of the dividend is secure going forward.  Maintaining the dividend is a stated priority of the management team.  Although a slight reduction is possible (along with a temporary disruption in the quarter during which they internalize management), I think they are well-positioned overall to deliver on their goal of maintaining the full dividend.  If you’re more concerned about this than I am, consider buying the preferreds instead.  Preferred stockholders have to be paid before common stockholders, plus the preferred dividends accumulate forward if they are not paid.

As with any investment, make sure to review the company’s annual report and other SEC filings to get a good understanding of the company before investing.  Pay particular attention to the disclosures of potential risks in those filings.  You can find investor info for Bluerock Residential REIT here.  Just because this company is right for me right now doesn’t mean it is necessarily right for you.

As I disclosed above, I own shares of BRG as of the publishing of this post.  View other important disclaimers on this page.


The Torpedo Trading Live Stream

Watch more live streams like this at https://www.twitch.tv/torpedotrading.  Follow the channel, and you can receive notifications when I go live.

If you miss a stream, highlight clips like this one can be found at my YouTube channel.

 

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Treasury Inflation-Protected Securities (TIPS) and real estate investment trusts (REITs) are two of the best asset classes for long-term oriented investors.

They also work quite nicely in a retirement account, generating interest and dividends while we wait for bargains across other areas of the market.

Here are two chart studies, one on TIPS and one on the real estate sector:

 

 

 

For more videos like these, subscribe to my YouTube channel.  You can also watch my live trading stream on Twitch.tv and interact with me in real-time.

 

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Real estate packs a powerful punch for your portfolio.  By purchasing shares of a real estate investment trust (REIT), any investor can easily gain access to this vast and powerful asset class.  REITs are especially good for younger people or renters who lack any exposure to real estate.  In this episode I’ll teach you the basics of investing in REITs, what to watch out for, and how to get started.  I also go through a list of my favorite choices to help you find some that may be right for you.

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North Bay Village

(CC image by Ines Hegedus-Garcia on Flickr)

Section 1: Background & Basics

  • What is a REIT?  How is a REIT different from a stock?
  • Listing types
  • Types of investments held within REITs

Section 2: What Determines the Price?

  • Fundamentals
  • Other financial conditions
  • Societal trends & demographics
  • How to pick a good time to add to, or to reduce, your REIT holdings

Section 3: Why You Should Own REITs

  • Exposure to hard assets that produce good cash flows
  • Income
  • Diversification

Section 4: Areas to Examine When Selecting a REIT

  • Equity REITs vs. Mortgage REITs: Very different!
  • Debt: levels & maturities
  • Exposure to troubled entities
  • Concentrated portfolios
  • Geography
  • Management
  • Tax treatment (United States)

Section 5: How to Begin Today

Resources

Background on REITs

REIT industry financial snapshot

Jeffrey Gundlach betting big on mortgages

 

Intro music by audionautix.com

Find more episodes of the Torpedo Trading Podcast at this link

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