Despite what some pundits may say, the “lower for longer” status could be around for some time, because even if the Federal Reserve raises interest rates twice this year, the benchmark will still be under 1%, which remains at historical lows. So what are investors who need income to do, especially with many of the bond proxy stocks at multiyear highs?
The analysts at UBS that cover real estate investment trusts (REITs) have combed through the stocks and have a list of most preferred companies. We screened that list looking for those with the biggest distributions to shareholders. It’s important to remember that REIT distributions may contain return of principal.
Camden Property Trust
This top company remains a Wall Street favorite. Camden Property Trust (NYSE: CPT) is company engaged in the ownership, management, development, redevelopment, acquisition and construction of multifamily apartment communities. Camden owns interests in and operates 172 properties containing 59,792 apartment homes across the United States. Upon completion of eight properties under development, the company’s portfolio will increase to 62,649 apartment homes in 180 properties.
When the company announced first-quarter results, which were generally in line with expectations, it also announced $1.1 billion in asset sales, of which approximately $425 million is expected to be returned to shareholders in the form of a special dividend, with the remaining $675 million used to retire debt and prefund in the entirety the $245 million remaining to be spent on the company’s current development pipeline.
Camden shareholders receive a solid 3.6% distribution. The Thomson/First Call consensus price target is set at $85.25. The stock closed most recently at $84.10 per share.
This is another one of the top yielding REITs on the most preferred list. DDR Corp. (NYSE: DDR) is an owner and manager of 401 value-oriented shopping centers representing 119 million square feet in 41 states and Puerto Rico. Its portfolio is comprised primarily of large-format power centers located in top markets across the United States, and it is actively managed to create long-term shareholder value.
The DDR management team has been focused on upgrading the quality of its portfolio over the past five years, while growing both its funds from operations and dividend payout. DDR is the largest owner of U.S. power centers, which have outperformed smaller open-air shopping centers. This is largely due to the higher percentage of quality anchor tenants and junior anchors, as well as fewer small-store tenants.
DDR investors are paid an outstanding 4.4% distribution. The consensus price target is at $19.09. Shares closed most recently at $17.33.
Spirit Realty Capital
This is another higher yielding REIT that makes good sense for growth and income accounts. Spirit Realty Capital Inc. (NYSE: SRC) invests in and manages a portfolio primarily of single-tenant, operationally essential real estate assets throughout the United States.
Single-tenant, operationally essential real estate generally refers to free-standing, commercial real estate facilities where tenants conduct business activities that are essential to the generation of their sales and profits. The company’s properties are frequently acquired through strategic sale-leaseback transactions and are predominantly leased on a long-term, triple-net basis to high-quality tenants.
Spirit Realty investors are paid a juicy 6.11% distribution. The consensus price target is posted at $12.04. Shares closed on Wednesday at $11.45.
This top REIT also offers investors solid total return potential. Prologis Inc. (NYSE: PLD) is the global leader in logistics real estate with a focus on high-barrier, high-growth markets. As of March 31, 2016, the company owned or had investments in properties and development projects expected to total approximately 667 million square feet (62 million square meters) in 20 countries.
Prologis leases modern distribution facilities to a diverse base of approximately 5,200 customers across two major categories: business-to-business and retail/online fulfillment.
The company reported a record increase in rents in the first quarter, gains it attributed to limited new construction despite rising demand. In addition, during the first-quarter 2016, Prologis signed 46 million square feet of leases in its owned and managed portfolio, compared with 39 million square feet in the year-ago period. Customer retention was 84.4%, against 86.3% in the comparable prior-year period.
Prologis shareholders are paid a solid 3.52% distribution. The consensus price target is $48.78, and shares closed most recently at $47.79.
While many of these companies have had solid runs, they remain in UBS’s Most Preferred category, and they still make sense for income investors. It may be smart to buy partial positions now and see if prices come down at some point this summer.