The economic outlook remains grim, with the growing likelihood of a recession because of the still-elevated inflation and the recent banking crisis. Hence, quality REITs Gaming and Leisure Properties, Inc. (GLPI), Ladder Capital Corp (LADR), and Whitestone REIT (WSR) could be ideal investments since they offer high-yield dividends that could cushion your portfolio against any potential repercussions of an unpredictable economy.
The consumer price index (CPI) rose 0.4% in February, resulting in an annual inflation rate of 6%. Although inflation fell for the eighth consecutive month, it remains significantly higher than the Fed’s target of 2%. Continued interest rate hikes to tame stubborn inflation and recent banking woes are raising the odds of a recession this year.
This year's persistent theme of uncertainty is likely to have no significant implication for Real Estate Investment Trusts (REITs) because of their strong operational performance and balance sheets. REITs tend to perform better during periods of high inflation as they benefit primarily from increasing prices of their properties.
Moreover, REITs display financial robustness with historically low leverage and well-structured fixed-rate debt resulting in minimal current interest expenses. Most importantly, they distribute at least 90% of taxable income to shareholders in the form of dividends, resulting in a reliable source of income in tumultuous times.
According to a report by Technavio, the global REIT market is projected to grow at a 2.8% CAGR between 2022 and 2027. The market size is expected to increase by $333.01 billion during the forecast period.
Investors’ interest in REITs is evident from the S&P Indices S&P/Citigroup US REIT Index’s 9.1% returns over the past six months.
Let’s delve into the factors that make GLPI, LADR, and WSR worth investing in.
Gaming and Leisure Properties, Inc. (GLPI)
GLPI, a Pennsylvania real estate investment trust, acquires, finances, and owns real estate property for triple-net lease arrangements with gaming operators. The company self-administers and manages its portfolio of approximately 57 gaming and related facilities, comprised of real property associated with gaming and related facilities.
On January 3, GLPI acquired the land and real estate assets of Tiverton Casino & Hotel in Tiverton, RI, and Bally’s Hard Rock Hotel & Casino Biloxi in Biloxi, MS, from Bally’s Corporation (BALY) for $635 million, including $15 million in the form of OP units. Such strategic acquisitions should aid the company’s expansion.
On March 10, the GLPI distributed its first quarter dividend of $0.72 per share on its common stock, along with a special dividend of $0.25 per share linked to the sale of the Tropicana Las Vegas building. GLPI pays a $2.88 per share dividend annually, translating to a 5.61% yield on the current price level. Its four-year average dividend yield is 6.27%.
GLPI’s total revenue grew 12.8% year-over-year to $336.39 million in the fourth quarter that ended December 31, 2022. Its adjusted EBITDA increased 12.6% year-over-year to $312.01 million. The company’s adjusted funds from operations (AFFO) rose 16.5% from the year-ago value to $239.14 million, while AFFO per share came in at $0.97, up 4.7% year-over-year.
The consensus revenue estimate of $1.43 billion for the fiscal year (ending December 2024) reflects a 2.2% year-over-year improvement. Likewise, the consensus FFO estimate of $3.74 for the next year indicates a 2.5% rise year-over-year. Furthermore, the company topped its consensus revenue estimates in all four trailing quarters.
The stock has gained 11% over the past six months to close the last trading session at $51.31.
GLPI’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
GLPI has an A grade for Sentiment and a B for Stability, Growth, and Quality. It ranks #5 in the 47-stock REITs - Diversified industry.
In addition to the POWR Ratings I’ve just highlighted, you can see GLPI’s ratings for Value and Momentum here.
Ladder Capital Corp (LADR)
LADR is a commercial real estate investment trust that invests in senior first mortgage loans. Its segments include Loans; Securities; and Real Estate. Its portfolio includes mortgage loan receivables, securities, and various properties.
On March 15, LADR announced its $0.23 per share of Class A common stock dividend for the first quarter of 2023. The cash dividend is payable on April 17, 2023, to stockholders of record on March 31, 2023. The company pays a $0.92 per share dividend annually, translating to a 10.03% yield on the current price level. Its four-year average dividend yield is 9.51%.
During the fiscal year that ended December 31, 2022, LADR’s net interest income stood at $97.92 million, compared to a net expense of $6.85 million in the previous year’s period. In addition, the company’s distributable earnings rose 141.9% year-over-year to $148.40 million, and its distributable EPS came in at $1.16, up 136.8% year-over-year.
The consensus revenue estimate of $324.80 million for the fiscal year (ending December 2024) reflects a 9.2% year-over-year improvement. Likewise, the consensus EPS estimate of $1.28 for the same period indicates a 1.2% rise year-over-year. Moreover, the REIT topped its consensus revenue and EPS estimates in all four trailing quarters, which is impressive.
Shares of LADR have marginally gained intra-day to close the last trading session at $9.17.
LADR’s promising fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
LADR has an A grade for Sentiment and a B for Growth and Value. It has topped the 47-stock REITs - Diversified industry.
Click here to access additional LADR ratings for Momentum, Stability, and Quality.
Whitestone REIT (WSR)
WSR is a community-centered REIT that acquires, owns, operates, and develops open-air retail centers in Phoenix, Austin, Dallas-Fort Worth, Houston, and San Antonio. The centers have a mix of service-oriented tenants, including restaurants, grocers, and health, fitness, financial, and logistics services. It wholly owns about 57 commercial properties.
On March 9, WSR declared a monthly cash dividend of $0.04 per share on the company's common shares and operating partnership units for the second quarter of 2023. The dividend amounts to $0.12 per share quarterly and $0.48 on an annualized basis. WSR’s current dividend translates to a 5.41% yield annually. Its four-year average dividend yield is 7.31%.
Dave Holeman, Whitestone’s CEO, said, “The current dividend provides shareholders with an approximate 5% yield and allows the company to focus on our target of bringing debt/EBITDAre to approximately 7x by year-end 2023.”
For the fourth quarter that ended on December 31, 2022, WSR’s total revenue increased 5% year-over-year to $34.92 million. Additionally, the company’s normalized FFO stood at $11.87 million, a 12.8% increase from the year-ago value, while normalized FFO per share came in at $0.23, up 9.5%year-over-year.
Analysts expect WSR’s revenue to grow 2% year-over-year to $148.13 million for the fiscal year ending December 2024. The company’s FFO for the same year is expected to grow 4% year-over-year to $1.01. Furthermore, the REIT has surpassed its consensus revenue estimate in three of four trailing quarters.
The stock has gained 4.8% over the past six months to close the last trading session at $8.88.
WSR’s POWR Ratings reflect its solid prospects. The stock has an overall rating of B, equating to Buy in our proprietary rating system.
The stock has a B grade for Stability and Sentiment. Within the same industry, it is ranked #2 of 47 stocks.
To see additional POWR Ratings for Value, Quality, Growth, and Momentum for WSR, click here.
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GLPI shares were trading at $51.43 per share on Monday afternoon, up $0.12 (+0.23%). Year-to-date, GLPI has gained 0.53%, versus a 7.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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