4 REITs paying over 5% dividends, all trading below book value


Investors in these property investment funds benefit from dividends higher than the returns paid by holding 10-year Treasury bills. These REITS are also inexpensive, if we can judge by applying classic valuation techniques: each is now trading below its book value.

The catch may be that there is a lot of debt on the books of these companies. This is not that strange considering the typical financial structure of real estate investment trusts. Anyone who sees them as additions to a balanced and diversified portfolio will want to take a look.

Here are the REITs, all of which are listed on the New York Stock Exchange:

Ares Commercial Real Estate.

Profits are far this year: minus 48.7%. Profits over 5 years are down 7.2%. Quarter-over-quarter profits are up 183%. Analysts expect Ares to post a profit over the next 12 months.

The action is trading with a 10% discount to reserve. The price / earnings ratio is 9.3. For a name listed on the NYSE, it trades relatively lightly at around 570,000 shares per day. The dividend yield is 8.75%.

ARMOR Residential REIT.

Earnings per share this year looks good at 22.3%. The 5-year record is a negative of 26.6%. The most recent quarterly profits are very positive 114.8%. The REIT ARMOR only exchanges 74% of the book value.

The price-to-earnings ratio is significantly lower than the market as a whole – and this industry – at 2.99. The company pays a dividend of 10.37%. The short float of 5.46% is a bit higher than other similar stocks.

MFA Financial.

Based in New York, New York, the company’s profits this year are down 297%. The 5-year record is down 31.7%. The latest quarter-over-quarter earnings report shows a 108% gain and analysts expect a positive 12-month result.

MFA is available for purchase with a 15% discount to reserve. The p / e of 7.84 is much lower than that of the S&P 500. Investors receive a dividend yield of 6.3%. There is a lot of liquidity with an average daily volume of 3.56 million shares.

Western Asset Mortgage Capital.

Based in Los Angeles, the company’s earnings per share this year were -516.7%. Gains over the last 5 years: -13.8%. Analysts expect a positive year to come. Western Asset can be purchased at 81% of book value.

The price / earnings ratio is about as low as it can get at 2.12 – a forward p / e should be around 10. A dividend of 6.96% is paid. The short free float is 4.72%. The average daily volume is 919,000 shares traded.

These are not buy recommendations. What’s interesting is that investors can still find low price-to-earnings ratios like these during a period of intense media focus on high-yielding tech stocks that pay little or no dividends.

More research would be needed and not just on these stocks in particular, but on the nature of real estate investment trusts in general. It would be wise to check with a registered investment advisor on this.

No investment advice. Statistics courtesy of FinViz.com.


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