Stop Buying Yield

Published Tue, 17 Nov 2020 21:40:31 -0500 on Seeking Alpha

Seeking AlphaREITsStop Buying YieldNov. 17, 2020 9:40 PM ET|| Includes: ACC, AIV, AMH, AMH.PD, AMH.PE, AMH.PF, AMH.PG, AMH.PH, APTS, AVB, BRG, BRG.PA, BRG.PC, BRG.PD, CLPR, CPT, ELS, EQR, ESS, INVH, IRT, MAA, MAA.PI, NXRT, RESI, SUI, UDR, UMH, UMH.PC, UMH.PDby: Colorado Wealth Management FundColorado Wealth Management Fund The REIT ForumThe #1 REIT Service Measured By Total ReturnsSummaryInvestors in REITs often put vastly too much emphasis on dividend yields.
When they switch over to FFO multiples, they are still not digging anywhere near deep enough.
AFFO multiples will put you in a better situation, but it still isn’t enough. To evaluate the REITs, you need to understand leverage.
Equity REITs with high leverage generally underperform. When you filter down to only considering REITs with a high yield, you get a bad sample size.
UMH is a great example of a common amateur pick. It has been garbage for years. The right path was SUI & ELS.
Thanks to the success of our public series on mortgage REITs, we’re testing a series on equity REITs. Your feedback on the layout is greatly appreciated in the comments section.
If the series is a hit with readers, we will look to expand on it. If not, it fades into the night. The goal of this series is to allow us to rapidly inform readers about the things we are seeing in any given sector (always some kind of REIT). At the same time, we will include some charts and tables to provide readers with raw data. Our commentary after the data explains what we’re seeing.
Let’s talk about housing REITs:
Symbol
Company Name
Subsector
AFFO Multiple
Div Yield
Price
Price to NAV
(AVB)
AvalonBay Communities, Inc.
Apartments
21.63
3.65%
$174.12
0.94
(EQR)
Equity Residential
Apartments
22.94
3.86%
$62.50
0.93
(CPT)
Camden Property Trust
Apartments
23.73
3.26%
$101.81
0.98
(ESS)
Essex Property Trust,... Read more