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Throughout June, REITs were mixed with slightly over half in positive territory. Inflation measures were trending lower, but skepticism among some Federal Reserve members about the economy’s ability to reach the FED’s 2% inflation target given the strength in the economy weighed on REIT prices.
Despite the uncertain interest-rate outlook, many first quarter REIT earnings reports have been favorable, proving the market wrong about the ability of REITs 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. These three REITs are the best of the high-yielding REITs for July.
NewLake Capital Partners
NewLake Capital Partners Inc. (OTC:NLCP) is an internally managed specialized industrial REIT in New Canaan, CT, with 31 properties of 1.6 million square feet across 12 states. NewLake Capital Partners specializes in triple-net leasing to cannabis companies and providing capital when necessary.
NewLake was founded in 2019 and had its IPO in August 2021. Its tenants include the largest companies in the cannabis industry, such as Curaleaf, Cresco Labs and Trulieve. As of May 2024, it had a 100% occupancy rate, with an average of 14.1 years remaining on its lease terms and 2.6% annual rent escalations.
Recent news has positively affected NewLake’s share price. On May 1, the U.S. Drug Enforcement Administration (DEA) said it supports moving toward reclassifying marijuana from the Schedule I group to the less regulated Schedule III group. The proposal still needs to be reviewed by the White House Office of Management and Budget, then another review by an administrative judge.
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On May 8, NewLake announced it was investing $16 million in a marijuana cultivation facility in East Hartford, CT, and had entered into a long-term triple-net lease with its preexisting tenant, an affiliate of C3 Industries Inc.
On May 9, NewLake announced its Q1 2024 operating results. FFO of $0.50 beat the estimates of $0.46 and topped FFO of $0.44 in Q1 2023. Revenue of $12.60 million beat the estimate of $11.98 million and topped Q4 2022 revenue of $11.42 million.
On June 13, NewLake Capital Partners increased its quarterly dividend from $0.41 to $0.43 per share. The $1.72 annualized dividend presently yields 8.70%.
NewLake Capital Partners had an excellent total return of 8.32% in June. With an election approaching, the reviews may approve the reclassification, which would be very positive for all cannabis-related REITs.
Omega Healthcare Investors
Omega Healthcare Investors Inc. (NYSE:OHI) replaces Alpine Income Trust (NYSE:PINE) as one of the best high-yield stocks to buy in July.
Omega Healthcare is a triple-net equity health care REIT in Hunt Valley, MD, that provides financing, capital, and triple-net leasing to 73 different operators among 866 senior housing, skilled nursing, and assisted living facilities in 42 U.S. states and the United Kingdom.
Omega Healthcare Investors has operators who provide the day-to-day management of these facilities. Omega has nearly $10 billion worth of real estate investments. Texas and Indiana are the two states with the largest number of Omega facilities.
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On May 2, Omega Healthcare Investors reported its Q1 2024 operating results. AFFO of $0.68 per share beat the analyst consensus estimate of $0.66 and topped AFFO of $0.66 per share from Q1 2023. Revenue of $243.299 million was above the analyst consensus estimate of $231.639 million and was an 11.50% increase over revenue of $218.202 million in Q1 2023.
Omega Healthcare also affirmed its full-year 2024 AFFO guidance of $2.70-$2.80.
One of Omega Healthcare’s strengths has been its quarterly dividend. Although there have been no increases since October 2019, more importantly, there have been no cuts or suspensions, even during the COVID-19 pandemic.
The quarterly dividend is $0.67 per share, and the $2.68 annualized dividend yields 7.89%. The payout ratio of 97% is somewhat high and not conducive to further dividend hikes soon, but with a yield near 8%, that should be no problem for investors.
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 that it operates. The agreement is subject to approval by the bankruptcy court.
Recent analyst ratings have been positive. On June 21, Ford Equity Research upgraded Omega Healthcare from four to 3. On June 26, Truist Securities analyst Michael Lewis maintained Omega Healthcare on Hold and raised the price target from $32 to $33. Omega has already surpassed that, ending June at $34.25.
The Healthcare REIT subsector has shown strength recently after two years of negative performance. Omega Healthcare’s total return in June was 5.94%. Year-to-date, Omega Healthcare’s total return is 15.36%.
Even with the strong 2024 performance, the price/FFO ratio is still only 12.33, slightly below the health care sector median of 12.45.
But two notes of caution must be expressed. Omega’s payout ratio of 97% is very high, so an increase in FFO is necessary for Omega to maintain its dividend. The share price has run up about 23% since February.
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 April 30, TPG RE Finance Trust reported its Q1 2024 operating results. Adjusted earnings per share (EPS) of $0.30 beat the estimated $0.18 and topped EPS from Q1 2023 of $0.17. Revenue of $38.927 million was ahead of estimates of $23.180 million and 54.14% above Q1 2023 revenue of $25.255 million.
TPG Real Estate pays a quarterly dividend of $0.24 per share. The dividend yield on the $0.96 annual dividend is 11.31%.
TPG’s earnings report and declining mortgage interest rates have been huge catalysts for the share price, with total returns of 17.05% and 3.50% in May and June, respectively. The company appears to have momentum that can continue into July as well.
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This article 3 High-Yield REITs To Buy In July originally appeared on Benzinga.com
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