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While a robust month of July created positive gains for most REITs, as August begins, the winds of recession have dampened investors' spirits and diffused the anticipation of FED interest cuts in September.
Second-quarter earnings reports have been quite favorable for most REITs, proving the market wrong about REITs' ability to perform well in a higher interest-rate environment.
When selecting REITs to buy, investors cannot just chase high-yielding dividends without considering the overall recent performance, safety and reliability of the dividend and the company.
Look at three high-yield REITs that posted solid Q2 returns and should continue to perform well over the month ahead. With market volatility picking up, investors can take advantage of increasing yields for the long term:
Clipper Realty
Clipper Realty Inc. (NYSE:CLPR) is a small, New York-based, self-administered and self-managed REIT that owns, manages and operates 11 multifamily residential and commercial properties in the New York City area. It was formed in 2017.
On Aug. 1, Clipper Realty declared its second-quarter 2024 operating results. FFO of $0.17 per share was 41.67% above the consensus estimate of $0.12 and was a 30.77% increase over FFO of $0.13 in Q2 2023. Revenue of $37.346 million beat the estimate of $36.008 million and topped its Q2 2023 revenue of $34.543 million.
On Aug. 2, Clipper Realty declared a quarterly dividend of $0.095 per share in line with its previous dividend, payable Aug. 22 to shareholders of record August 15. The annualized $0.38 dividend yields 8.74%.
The dividend is well covered with a forward payout ratio of 67.86%. While the dividend has remained the same for several years, no cuts or suspensions have occurred.
Clipper Realty gained 18.21% from July 1 to Aug. 2, but given the recent earnings, this high-yield REIT that trades below $5 a share could continue to appreciate in the coming months.
Omega Healthcare Investors
Omega Healthcare Investors Inc. (NYSE:OHI) is a Hunt Valley, MD triple-net equity healthcare Real Estate Investment Trust (REIT) that provides financing, capital and triple-net leasing to 77 different operators of 900 senior housing, skilled nursing and assisted living facilities in 42 states throughout the U.S. and the United Kingdom.
Omega Healthcare's operators provide the day-to-day management of these facilities. Omega has nearly $10.2 billion worth of real estate investments. Texas and Indiana have the largest number of Omega facilities.
One of Omega Healthcare's strengths has been its quarterly dividend of $0.67 per share. The $2.68 annualized dividend currently yields 7.13%, over 4x the average dividend yield of the S&P 500 company. Although there have been no increases since October 2019, more importantly, there have been no cuts or suspensions, even during the COVID-19 pandemic.
One negative is that the payout ratio of 95.7% is very high and not conducive to further dividend hikes soon, but the ratio dropped from 97% with the Q2 earnings and could continue to decline with further FFO growth.
On June 3, Omega Healthcare announced it would commit $10 million to Lavie Care Centers, one of Omega's operators, to fund 50% of debtor-in-possession (DIP) financing during bankruptcy. One of the DIP financing stipulations is that Lavie must pay Omega monthly rent of $3 million on the 30 properties it operates. The agreement is subject to approval by the bankruptcy court.
On Aug. 1, Omega Healthcare Investors reported its second-quarter 2024 operating results. FFO of $0.71 per share beat the analyst consensus estimate of $0.69. Revenue of $252.75 million was above the analyst consensus estimate of $243.04 million and topped revenue of $250.19 million in Q2 2023.
Omega Healthcare also increased its full-year 2024 AFFO guidance of $2.70-$2.80 to $2.78-$2.84 per share.
Recent analyst ratings have been positive. On July 9, Scotiabank analyst Nicholas Yulico maintained Omega Healthcare at Sector Perform and increased the price target from $32 to $33. On June 26, Truist Securities analyst Michael Lewis maintained Omega Healthcare on Hold and raised the price target from $32 to $33.
The Healthcare REIT subsector has shown strength recently after two years of negative performance. Omega has led all Healthcare REITs over the past month with a gain of 12.96%. That kind of relative strength is rare in a high-yield stock.
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TPG RE Finance Trust
TPG RE Finance Trust Inc. (NYSE:TRTX) a subsidiary of TPG Real Estate, is a mortgage REIT with a $3.5 billion portfolio of first mortgage loans with an average loan size of $69.4 million in geographically diversified primary and select secondary markets across the U.S. 100% of its loans are presently performing.
On April 25, the Board of Directors approved a share repurchase program for up to $25.0 million of common stock.
On July 30, TPG RE Finance Trust reported its Q2 2024 operating results. Adjusted earnings per share (EPS) of $0.28 beat the estimate of $0.25 and topped EPS from Q2 2023 of $ (0.18). Revenue of $39.302 million was ahead of estimates of $29.175 million and 20.4% above Q2 2023 revenue of $32.634 million.
TPG Real Estate pays a quarterly dividend of $0.24 per share. The dividend yield on the $0.96 annual dividend is 11.33% and the payout ratio is 85.71%. However, TPG Real Estate has increased its EPS over the past two quarters and should continue to see a decline in the payout ratio. The earnings increases make TPG Real Estate one of the best high-yielding REITs to purchase going forward.
Can You Get Higher Yields Outside Of The Stock Market?
The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through REITs... Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider.
For example, the Jeff Bezos-backed investment platform just launched its Private Credit Fund, which provides access to a pool of short-term loans backed by residential real estate with a target 7% to 9% net annual yield paid to investors monthly. The best part? Unlike other private credit funds, this one has a minimum investment of only $100.
