B&W,
The point of this board is to discuss companies and what makes them good investments or not. I think it would make a more interesting discussion if you would address my concerns rather than “agreeing to disagree.”
You’re free to whatever you like, though.
Bear
Hi Darrell:
HASI continues to be a good one for me. I just added more this morning at $19.8499 Hasi is down over $5 from it’s recent all time high of over $25 is a compelling buy to me. Especially when I expect the MOSTLY TAX DEFERRED distribution to be raised about $o.04 per quarter starting with the payment that will be paid in early January 2017.
I believe most people don’t understand what they do or care. They follow everyone else without thinking their might be an easier and better way. Their attitudes allow these companies to remain under priced for long periods of time and allow those involved to accumulate huge amounts of stock that generate even bigger portfolio growth under the radar. Everyone is all excited about AMZN AAPL BRK etc.
I walk down the side road picking up shares as best I can, and as cheaply as they will sell them to me.
Good luck
b&w
Bear:
I am SAUL’S guest here on this board and it’s not my intention to get into an argument with another poster.
I believe your statement is out of line, because I don’t believe you know anything about the company other than looking at it for maybe one fleeting minute and then making a serious unfounded charge that a company that has successfully been in business for about 35 years is not legitamate because of your off the cuff opinion.
b&w
That doesn’t make sense. Their revenue can be used to run and expand their business. It never becomes “earnings” so they never have to pay it out. Why would they need to borrow? They only need to borrow if they’re trying to pay out more. That’s why it’s a ponzi scheme – the business only seems to be growing because they’re “paying” 2 dollars (in dilution) for every dollar of new revenue.
Bear
I don’t think this is what is happening but I don’t know this company specifically. Look at something like BIP, it is my longest holding to date and uses most of their free cash flow for dividend. I think also somewhere like 60-70%. But they are also expanding and buying other assets to grow future cash flows. They do this by issuing additional “units” (the are an Limited Partnership) to raise the cash. As long as they are buying assets wisely, the addition cash flow over time outweighs the additional dilution.
Since HASI is a REIT, they have to pay out a large amount of their FCF as a dividend to get the tax benefit I believe. So if they want to expend, they wouldn’t be able to do it from current revenue
That doesn’t make sense. Their revenue can be used to run and expand their business.
You mean their profits (at least I hope you do). But since they’re a REIT, by law they must distribute at least 90% of their taxable income to shareholders, as others here have noted. (You may want to educate yourself about REITs before going much further about them.)
HASI is a special kind of REIT, since it doesn’t invest in real estate. (It “provides debt and equity financing to the energy efficiency and renewable energy markets.”) These oddball REITs should be out of bounds for typical individual investors, and that goes double for small ones such as HASI. It’s great that some folks have made money in it. But step carefully: the bones of many of these sorts of REITs litter the trail.
Good warnings MisterFungi.
I took a close enough look at their business to understand that I don’t understand it. Which is to say I read a few sentences about what they do.
Mr F,
You mean their profits (at least I hope you do). But since they’re a REIT, by law they must distribute at least 90% of their taxable income to shareholders, as others here have noted. (You may want to educate yourself about REITs before going much further about them.)
No, I meant revenue. Revenue minus Expenses = Profit. If the company is spending to expand, expenses go up. Profit does not have to be paid out at 90% (or at any rate), because profit never happens. What am I missing?
These oddball REITs should be out of bounds for typical individual investors, and that goes double for small ones such as HASI. It’s great that some folks have made money in it. But step carefully: the bones of many of these sorts of REITs litter the trail.
I’d love to know what you mean.
Bear
I don’t think this is what is happening but I don’t know this company specifically. Look at something like BIP, it is my longest holding to date and uses most of their free cash flow for dividend. I think also somewhere like 60-70%. But they are also expanding and buying other assets to grow future cash flows. They do this by issuing additional “units” (the are an Limited Partnership) to raise the cash. As long as they are buying assets wisely, the addition cash flow over time outweighs the additional dilution.
JDC,
BIP has increased share count from 225M in Dec 2014 to 243M today (according to Google Finance). Seems a lot more sustainable than going from 21M shares to 38M shares like HASI has, doesn’t it?
Bear
JDC,
BIP has increased share count from 225M in Dec 2014 to 243M today (according to Google Finance). Seems a lot more sustainable than going from 21M shares to 38M shares like HASI has, doesn’t it?
Bear
that is a very short period
If I go the 2010 Annual report, page 87
https://bip.brookfield.com/~/media/Files/B/Brookfield-BIP-IR…
beginning 2009: 38.2
Ending 2009: 105.6M
Ending 2010: 156.3M
Now at 243M
I think it comes down to how well are they at allocating capital, can they buy assets that create returns in greater value of the dilution.
Did you HASI is a special kind of REIT, since it doesn’t invest in real estate. (It “provides debt and equity financing to the energy efficiency and renewable energy markets.”) These oddball REITs should be out of bounds for typical individual investors, and that goes double for small ones such as HASI.
Really---- Out of Bounds? and HASI --Doubly out of bounds? --That’s pretty severe–isn’t it? I guess their being profitably in business growing for the past 35 years is of no importance
It’s great that some folks have made money in it.
I thought that was the object of investing in the market. And you said it should be OUT OF BOUNDS----IN FACT YOU SAID HASI SHOULD BE DOUBLY OUT OF BOUNDS.
Are you serious?
b&w
What you’re missing is that for most REITs, depreciation is the single largest expense line item that needs to be adjusted out to find taxable income. 90% of the taxable income is paid out. This is why a few posters above have suggested that you read into REIT structure before you comment more. Here’s the first one that popped up on Google search for me:
http://seekingalpha.com/article/3062776-reits-the-90-percent…
Previous post was directed at Bear, sorry for the lack of clarification
This is a decent introduction to REITs:
About 75% of the companies in the global real estate securities market are REITs. By organizing as a REIT, real estate companies gain special tax considerations that put shareholders on a level playing fi eld with investors that own real estate directly. Because of this unique structure, REITs are an effi cient way for individuals to invest
in income-producing real estate.
A REIT is required to distribute the majority of its taxable net income to shareholders and must adhere to certain restrictions on its operations, organization and ownership (see table below). In return, the REIT does not have to pay corporate taxes on the income and capital gains it distributes, thereby reducing or even eliminating its tax burden.
You can read more at https://www.reit.com/sites/default/files/portals/0/PDF/Intro…
There’s also a great public REIT board on the Fool which can be found at http://discussion.fool.com/real-estate-inv-trusts-reits-100061.a…
I’m sure they would be happy to answer any further questions there and I’m sure Saul would appreciate the discussion being moved too.
Matt
MasterCard (MA), Nestle (NSRGY), PayPal (PYPL), and Verizon (VZ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx
There’s also a great public REIT board on the Fool which can be found at http://discussion.fool.com/real-estate-inv-trusts-reits-100061.a……
I’m sure they would be happy to answer any further questions there and I’m sure Saul would appreciate the discussion being moved too.
I believe this is the second time recently that I’ve seen a good, focused discussion on a particular investment get asked to be moved, presumably because it wasn’t focused on a typical “Saul stock”. The name of this board is, after all, “Saul’s Investing Discussions”. If a discussion like this isn’t welcome here, maybe the board needs a more specific title, such as “Saul’s Growth Stock Discussions”?
I believe this is the second time recently that I’ve seen a good, focused discussion on a particular investment get asked to be moved, presumably because it wasn’t focused on a typical “Saul stock”.
Hi Carplan, I think the problem is not that this isn’t a “Saul Stock” but that it’s turned into an argument about the details of REITs that has gone on for 27 posts now, and it starts to hog the board and discourage other people from looking in on the board. We’ve been patient, and suggesting a move after 27 posts isn’t cutting off the discussion too quickly, BUT IT IS TIME to move it on to a board that discusses REITS. Thanks for your understanding.
Saul
PS From the Basic Rules of the Board
There are also companies that don’t belong on the board. Like a company that has seen decreasing revenue and decreasing earnings over a number of years, and now is being considered as a take-over, or a sell-off-the-parts candidate. That’s simply not what this board is about. There are other boards for this kind of situation. Another example would be an early stage biotech, with no actual revenue, but great ideas. Or a new IPO of a company that has revenue, but still has large losses and hopes of breaking even two years from now. You can weed those out yourself.
It looks like arguments about the details of REITs fit in there too.
Saul
Are you serious?
Yes. People have made money on lottery tickets, too. That doesn’t make them good investments. HASI is a small-cap hybrid REIT, one that has been operating as a REIT for less than 3 years. It is a risky investment.
Take it to the REIT board here, which has some very knowledgeable investors on it, and see what they say, if you care.
I’m glad you’ve made money in it. But there are a fair number of newbies here, and I want to make sure they understand the risks.
That’s all I have to say on the matter.
Not sure who to reply to, so I’ll reply to Saul.
I got interested in REITs a while ago based on what appeared to me to be a very intelligent and well informed post on SA (a rarity). The basic premis of the post was that data centers are growing like weeds with no signs of letting up and there a bunch of REITs that cater to this market by building data center shells and leasing them out to the likes of AMZN, MSFT, etc.
But reading the article got confusing because of the abundance of terms that I was unfamiliar with. I simply don’t understand the mechanics of this business. I know it seems simple, but it’s not. They use uncommon performance measures and the average investor would be hard pressed to know if a specific company was doing well, or headed for the dumpster. At least, that’s my impression.
There are so many hours in the day. I have a hard enough time keeping up with the stuff I feel comfortable with. I concluded I don’t need to know this. There are lots of good investment opportunities without having to learn all new metrics and jargon. I’ll pass.
Hey brittle, for my own edification I’d like to take a look, any idea on the article or link?
Today after the surprising election results, REITs stock have been lower. AMT is down more than 5% and HASI is down almost 5%.
Do you have a story for that?
Does most REITs have large debts on their balance sheet? Is that a common factor to REITs and how do you know when large is too large?
tj
TJ:
Today after the surprising election results, REITs stock have been lower. AMT is down more than 5% and HASI is down almost 5%.
Do you have a story for that?
I have explained the reasons for my investment in HASI over the past almost 2 years. in case you haven’t noticed there has been an unexpected result in the US election yesterday, which have caused some disruption in the markets. In addition HASI was in the middle of a secondary offering that was successfully concluded this evening. Management had recently guided towards an increased dividend to be announced and paid this quarter during the first week of January The increase is expected to be $0.04 per quarter to $0.34 from the previous $0.30 per quarter.
My investment objective is to maximize distribution growth and I expect to drip the HASI cash proceeds into additional shares. So that being the cash, the HASI stock decline actually will give me more shares per investable dollar benefits my portfolio because I am Buying and currently have no desire to sell. I’m growing my portfolio income on market dips.
b&w