Over the past year, many sectors have suffered from the COVID-19 pandemic. Some companies in the affected sectors have been pushed into bankruptcy, while others have teetered on the brink. One sector that was hit especially hard was real estate, including the real estate investment trusts (REITs). With restaurants, bars and many stores closed for months at a time, numerous well-known companies got hit hard, but the good news for investors is that three of the best REIT stocks are on sale, and they all pay outstanding dividend distributions.
A new Goldman Sachs research report, while certainly not pounding the table, does indicate there is a solid opportunity for investors to take advantage of the dislocations in the sector, especially the retail-focused companies. The report noted this when discussing upcoming earnings and guidance expectations:
Each company giving guidance (or not) will provide an indication of how much visibility each has into 2021 earnings, and could (to the extent they provide outlooks) be a positive indicator versus 2020, when they did not have that visibility. Guidance ranges may be wider than historical ranges have been. In the past, retail REITs had decent visibility into earnings given multi-year leases. However, current uncertainties remain with respect to payment of deferred rents, final outcome of rents still under negotiation, retailer strength (especially in small shops), and the pace of a vaccine-led recovery in leasing, sales, and traffic.
Three top REITs are rated Buy at the firm, pay dependable distributions and make good sense for growth investors looking for income and some upside from a very damaged sector. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This is among the highest yielding REITs, and it offers a solid total return proposition for investors. Brixmor Property Group Inc. (NYSE: BRX) is an internally managed REIT that owns and operates the largest wholly owned U.S. shopping center portfolio. Brixmor owns 522 community and neighborhood centers totaling 86.7 million square feet in 38 states.
The largest real estate concentrations by state are Texas (11%), Florida (10%) and Pennsylvania (7%). The portfolio is primarily the aggregate of Centro Properties Group United States acquisitions from 2005 to 2007. Centro Properties Group was an Australian-based company with two primary investment arms.
The report noted this when discussing the payout to shareholders:
The company has stated that the level at which its quarterly dividend was reinstated in 2020 ($0.215 per share) was sustainable, even if pandemic related headwinds were to persist. We assume that the company stays at this level through 2021, resulting in a 2021 estimated Adjusted Funds From Operations payout ratio of 73.0%.
So, shareholders receive an outstanding 4.88% dividend. Goldman Sachs has set a $20 price target on the shares, which compares with the lower Wall Street consensus target of $17.53 and Thursday’s closing price of $17.61 per share.