With interest rates falling, is now a good time to start thinking about investing in REITs?
VNQ, the Vanguard REIT ETF, has been rising recently.
https://investor.vanguard.com/investment-products/etfs/profile/vnq#overview
https://www.google.com/search?client=firefox-b-1-d&q=vnq+etf+chart
Does it make sense to consider REITs at this point of probable lower interest rates? If so, an index fund or individual company stocks…or preferred shares?
Recommendations?
Wendy
Wendy do you think they have run up to much now? Have you looked at any Reit’s? I looked at O when it had a dividend above 6 percent. I maybe should have pulled the trigger but there were other stocks that I thought would give a better return. I did pick up NLCP when it’s dividend was above 12 percent and I picked up IIPR when it’s dividend was above 10 percent. Both of them are Marijuana reit’s that are triple nets. They are having a problem with some of their renter’s paying. But the AFFO payout ratio for NLCP is around 83.47 percent and coming down from the mid 85 percent. The AFFO payout ratio for IIPR is around 78.42 percent and has come down from the mid 85 percent also. NLCP is a much smaller reit. IIPR has about $158 million in cash and $300 million in debt. Their Senior notes come due in 2026 and is around $296 million. NLCP has around $31 million in cash and around $1.9 million in debt. When I bought them many people thought that the marijuana industry might collapse, they still are not out of the woods but I do think they both are stable.
With all that being said I do not think I would buy them now because they have ran up so much. But there might be other Reit’s that haven’t. I did look at MPW but didn’t dig to deep, they have cut their dividend.
Andy
Wendy, I just looked at the Mortgage Reit’s, just a glance but they do seem interesting. Look at this chart on AGNC.
They hit a low in 2009 and in 2012 they hit a high. They have had a long drop since 2012. From 2009 to 2012 the interest rates had been dropping . Then they fluctuated going from around 3.68 percent to 4.70 percent generally. Then in 2023 they pushed up to 7 percent. Now they are going to go down. Could we have another push higher for AGNC and NLY while the interest rates go down? I haven’t looked into them at all just noticing how low they have come. NLY and AGNC at levels lower than 2009. Here is NLY’s chart. Remember I have no clue about Mortgage Reits so this is just something to notice.
NLY looks like a broken company. Wonder what is going on.
Andy
I don’t know; but if you figure anything out be sure to let me know!
(Long AGNC/NLY)
JimA
Hi folks. Not much activity here, but thought I’d post my own admittedly limited experiences.
Disclaimer: I’m far from a successful investor. During a fit of highly active day trading (mostly 2021-2023) for example: I downloaded two years’ worth of data, close to a thousand trades, and found my net gain was a fraction of a percent. In other words, nearly dead even. And that was not including a fairly large position taken in Russian stocks in early 2022, which I excluded because I rationalized them as being in limbo.
I tend to look for the underdog, the out of favor stock. Despite the S&P recently hitting a record high, apparently REITs are not doing great. I zeroed in on one that’s been in the news lately: OPI
As a contrarian, I’m attracted to such a speculation precisely because it’s lost favor with those who’d normally invest in it. Here are some of the major reasons:
OPI recently (for all practical purposes) eliminated its dividend (it’s now one cent).
Their core holdings (office real estate) are a tough market. Well, perhaps. I can understand how office work has lost its luster in recent years.
I won’t even delve into the finances of OPI, other than to point out that as far as I could tell from glancing at its financials, it’s price to book is about $36. I’ll admit that I am no expert in analyzing a company, but it seems to me that is rather a steep discount of the many assets that OPI has. It’s not as if office property has dropped precipitously in value.
Inflation (probably) continues higher than official claims. That means that OPI’s debt becomes easier to pay down in real terms.
In general, I’m interested in this REIT because, so far as I can tell, all the bad news that could reasonably happen should have been discounted. The dividend (for all practical purposes) is suspended. Yes, they’re losing money the past few years.
I’m interested enough that I am long 10 December 2024 5 calls at a cost of ~ $700.
I have been there and done that. I would encourage you to move away to find good companies and buy. There is a reason why these stocks are avoided. Unless you are a great investor, who can understand the mispricing and has a big financial muscle to exploit it, it is a losers game.
Coming to OPI, they have severe liquidity issue and the book value should not be relied. If they can even get half of the book value, they would have sold those properties and used the cash to retire stock.
You are betting on something that you have no idea. This is how you end up breaking even on a great bull market. I sincerely hope you switch from bottom fishing, trying to buy a company that has firmly one foot in bankruptcy, etc. Investing is a long game, a lifelong marathon. You will be spending considerable financial and physical well being with your approach. Yes, physical these losses may seem not bother you, but they do. They take a toll on you.
Wishing you the best.
Here is their debt picture
Separately, your option strategy is a hail mary, your break even is 100% stock gain.
The more I think about it, there is a higher chance this is going to be resolved in bankruptcy.
