Stock Market Plunge: 3 Real Estate Stocks I’m Buying Right Now
Not only has the bear market been a beast for most stocks, but it has also created some beauties in the form of beaten-down equities that garnered some renewed buying attention.
I’m primarily an income investor interested in supplementing retirement cash flow, so the three I’m focusing on are all real estate investment trusts (REITs): Terrano Realty (TRNO 0.39%), Alexandria Real Estate Equities (are 1.58%), and Life Storage (LSI 0.93%).
The chart below shows that the share price of each stock has fallen sharply and has remained below even that of the S&P 500. But each also has long-term buy-and-hold characteristics, including strong competitive positioning, durable demand, expanding portfolio, and potential. To raise the rent to increase the cash flow in the event of inflation.
They also have a good track record of shareholder returns. See the difference in the chart below once the dividend is included. Over the past five years, holding through market volatility and letting the dividend do the heavy lifting — my plan here — has turned into rather impressive long-term returns.
to keep track:
ARE . a strong second quarter for
As you can see, Alexandria is a laggard, but this Life Sciences Office REIT was tracking with the larger market until its recent shock, and its current yield of about 3.1% is up from the S&P 500’s 1.7%.
Plus, the company posted strong Q2 results on July 25, leading to an increase of about 4.5% in the share price over the next few days. Earnings highlights included a 33.9% increase in rental rates on a cash basis, the highest quarterly increase in its history. The leasing activity was the third largest recorded by Alexandria. Revenue was up 26% year over year, and funds from operations (FFO) for the first half of 2022 was up 8% compared to the same period last year.
The company has 7.8 million square feet of new space which is either under construction or nearing commissioning. Of that, 78% is already leased in a portfolio with a tenant list that includes many of the biggest biopharma companies in the industry. That revenue growth should be linked to the dividend growth that the company expects to continue.
Alexandria increased its dividend by 6% over the past four quarters, and its Q2 FFO payout ratio of 56% “allows us to continue to drive growth in cash flow from operating activities with our shareholders, while providing a significant opportunity for reinvestment.” retains the share,” the company said in its second quarter earnings announcement.
Big business in small warehouses
Terreno Realty is an industrial REIT specializing in small warehousing, consisting of approximately 250 buildings and 42 advanced land parcels, leased by approximately 570 clients in six major coastal markets. The strategy is to capitalize on the demand for logistics space in infill locations near ports, airports and major highways in markets with dwindling supplies for such niche locations.
Terrano is growing its portfolio rapidly, adding 10 properties in the second quarter, including I-405 in Redmond, Washington, near the New Jersey Turnpike exit in Newark and next to Los Angeles International Airport.
The company has increased its dividend for 10 consecutive years and is now earning around 2.3% return on cash flow basis with payout ratio of around 73%. Analysts rated the stock as medium buy and gave it a consensus price target of around $74, which would be a nice recovery from its current $60 or so a share.
There is a lot of life left in Life Storage
Lyft Storage is one of the major players in the self-storage business, with more than 1,100 facilities in 36 states, including its locations of ownership and operation, and a growing third-party management platform. The latter should help the company remain a strong competitor in this industry, with its relatively low cost of entry.
Another strength is that such businesses with month-to-month leases can rapidly increase rents to counter inflation. Demand for self-storage soared during the pandemic, and inflation and recession could sustain the popularity of that option when goods outweigh the space for millions of Americans.
In the first quarter, Life Storage grew FFO by one-third compared to the year-ago period and added 18 stores to its ownership portfolio and another 25 stores to its management platform. In July, the company raised its quarterly dividend by 8% from the previous quarter to $1.08 per share, up 46% from the year-ago quarter.
That dividend announcement included optimistic words from CEO Joe Sapphire: “Our team and platform are well-positioned to generate strong cash flow to invest in our technology initiatives, operating platform, assets and people, while helping shareholders invest in our technology.” Our rapidly growing return on capital. Core FFO per share. We look forward to delivering attractive total shareholder returns.”
And I think I can, with reasonable optimism, view this part of my portfolio looking at share price and total return over the coming months and years.
Mark Rapport holds positions at Alexandria Real Estate Equities, Life Storage Inc. and Terrano Realty. The Motley Fool has positions and recommends Terrano Realty. The Motley Fool recommends Alexandria Real Estate Equities and Life Storage Inc. The Motley Fool has a disclosure policy.