Daily Archives: October 15, 2018

REITS

Buy These 3 REITs Increasing Dividends In November

2018 has been volatile but so far into the year yielded a flat return for income stock investors. If you look at the Vanguard REIT Index Fund (NYSE: VNQ) you see that in 2018 investors have been hot and cold about REITs. Each time the Fed has increased short term rates, REITs have sold off. The result is a sector, including dividends, that is just above breakeven for the past 12 months. Over the same period, the S&P 500 is up over 11%. One way to get capital gains from REITs is to focus on buying those real estate investment trusts that will increase the dividends paid to shareholders.

Most REITs that regularly increase dividends do so once a year, and then pay the new dividend rate for the next four quarters. The timing of dividend increases is not widely followed, so if you know a bump in the payout rate of a REIT is coming soon, you can buy shares before the announcement and have a good chance at a nice share price boost when the new rate becomes actual news.

One of my income stock analysis techniques is to develop and maintain a database of REITs that tracks when during the year they have historically announced new dividend rates.

Currently I have about 130 REITs in the database, and out of those 90 have been increasing their payouts to shareholders.

While these REITs announce new dividend rates once a year, the timing varies. For every month of the year, there are companies that will announce a new rate.

Related: Buy This 8.4% REIT That’s Raised Dividends Every Quarter

Now is the time to look at the REITs that should increase dividends in November.

If you buy shares three to four weeks ahead of the dividend announcement you will be ahead of the crowd. The higher rate should produce a share price increase. In the worst case, your yield will go up compared to the current percentage quoted.

Here are four REITs that will probably announce dividend boosts in November.

Acadia Realty Trust (NYSE: AKR) acquires, redevelops and manages retail properties in the nation’s most dynamic urban and street-retail corridors, including those in New York, San Francisco, Chicago, Washington DC, and Boston.

Acadia Realty will announce its third quarter earnings results at the end of October. The new dividend rate announcement occurs during the first half of November. For the last five years, the dividend has been bumped up by one cent, which would be a 3.7% increase on the current $0.27 per quarter dividend. Payment of the new rate starts in January with a December 31 record date.

This REIT has also paid a special yearend dividend each of the last three out of the last five years.

AKR currently yields 3.6%.

American Assets Trust, Inc. (NYSE: AAT) owns, operates, acquires and develops retail, office, multifamily and mixed-use properties in high-barrier-to-entry markets in Southern California, Northern California, Oregon, Washington, Texas and Hawaii.

This REIT has announced a higher dividend in November of each of the last five years. In 2017 the new dividend was 3.8% higher than the old payout.

It looks like this year’s increase will be about 5%. The next dividend announcement will be around November 1 and have a record date of about December 10.

The payment will be just before or just after Christmas.

AAT currently yields 2.9%.

Kimco Realty Corp (NYSE: KIM) owns and manages open air shopping centers. This REIT slashed its dividend in 2009, during the financial crisis, but has increased it every year since then.

Kimco has increased the dividend by 7% on average for the last five years, and in 2017 the payout was increased by 4.2%. The company’s adjusted FFO per share was up flat in the first half of 2018 compared to the same period in 2017, so this year’s increase will probably be more modest than in the past.

Kimco typically announces a new dividend rate at the end of October or in in very early November with record and payment dates in January.

KIM currently yields 7.1%.

Bonus investment idea:

Kite Realty Group Trust (NYSE: KRG) is engaged in the ownership, operation, acquisition, development and redevelopment of neighborhood and community shopping centers in selected markets in the United States.

Kite was forced to slash its dividend rate during the 2007-2008 recession. The company restarted dividend growth in 2014.

The dividend has been increased by 33% since the first quarter of that year and was boosted by 5% last year.

I forecast a more moderate 3% to 5% increase this year. In recent years, Kite Realty announced a dividend increase in the last week of November, with record and payment dates in January.

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Market Preview

Market Preview: Market Settles But Closes Heading Lower, Earnings from Netflix, CSX and Alcoa

Market participants breathed a sigh of relief Monday as markets settled down from the extreme volatility of last week. Markets traded in a fairly narrow range, and then ended on a sour note, falling into the close. Nasdaq was again the most heavily hit, falling almost one percent. Traders weren’t taking the decrease in volatility as an all clear sign yet, as tensions remain high on several fronts, including interest rates and international politics. Investors in the technology sector are keeping an eye on rising tensions between the U.S. and Saudi Arabia over the disappearance of journalist Jamal Khashoggi. Saudi Arabia is a major investor in large technology companies, and some fear an escalation of tensions could impact some large U.S. tech companies. Sears (SHLD) declaration of bankruptcy Monday morning was almost a footnote for the market, as the company’s stock had been in a multi-year decline, and the bankruptcy had been expected for several weeks.   

Earnings season kicks off in earnest Tuesday as companies such as Johnson & Johnson (JNJ), UnitedHealth Group (UNH), Netflix (NFLX) and CSX Corp. (CSX) report to investors. Netflix is the first FAANG stock to report after the market volatility of last week. The company missed subscriber estimates last quarter, so investors will be wary of any missteps in this quarter’s report. Any negative commentary may bleed over into the tech sector in general. Analysts aren’t expecting any surprises out of J&J, but that may be just what the doctor ordered. While health care has been red hot on the year, the big drug company is actually down slightly. Investors may want to keep an eye on the stock after earnings to see if it starts participating in the rotation out of growth and into defensive names.

Tuesday’s economic numbers include Redbook retail data, industrial production data, the Housing Market Index, and the Labor Department’s Job Openings and Labor Turnover numbers, or JOLTS. The job openings number for August is expected to hold steady at 6.9 million after hitting a record in July. Wednesday morning the focus will be on housing before turning back to interest rates in the afternoon as the Fed meeting minutes are released. Consensus opinion is that housing starts will continue to fall when the number is released Wednesday, but permits for new building are expected to rise. Mortgage applications are also expected to decline almost two percent as both new and refi applications are both expected to drop for the month of September.

Earnings announcements from U.S. Bancorp (USB), Kinder Morgan (KMI) and Alcoa (AA) will take center stage Wednesday. Kinder Morgan had the advantage of rising oil prices, as well as closing a deal with the Canadian government on the sale of its Trans Mountain Pipeline, in the third quarter. Analysts will be eager to hear whether the company will be returning additional capital to shareholders or advancing other potential growth projects. Alcoa has been in a steady downtrend after hitting an April high of just over $62. Now at $35, investors will be looking for signs of a turnaround from the aluminum provider. More importantly, the company may have valuable insights into whether the overall economy may already be slowing in anticipation of higher interest rates.   

Dividends

Here’s My No. 1 Stock Market Prediction (and a 7.2% dividend to buy now)

A game-changing story about stocks just broke—and you almost certainly missed it.

That’s why I’m writing about this surprising news today: because it’s just what you need to know if you’re struggling with how to approach this interest rate–obsessed market, especially in the wake of the recent pullback.

Why haven’t you heard it?

Because good news like this doesn’t grab as much attention as Chicken Little panic articles, so the financial press skips it. But what I’m about to tell you is crucial to your financial well-being—and something I’ve been saying on Contrarian Outlook and in our CEF Insider service for months now.

Luckily, not everyone is ignoring the story. Bloomberg Businessweek just wrote an in-depth analysis of this piece of news, which is simply this: fears of a recession are way overblown, and the market is set for strong gains in the months ahead.

(In a moment, I’ll reveal a fund set to roll higher as the market surprises the doomsayers and takes off. Best of all, this ignored fund pays a safe 6.9% dividend.)

I was glad to read this upbeat news, because it echoes a piece I wrote over a year ago. The theme of that article was simple: there are several clear recession indicators and none of them have been in the danger zone for a while. Fast-forward to today and they still aren’t—and aren’t likely to be for a long time.

First, let’s take a look at the data Bloomberg compiled; as you can see, the chances of a recession happening in the next 0 to 12 months have nosedived:

Doomsday Predictions Turn Sunny

Also note that chances of a recession happening in the next two to three years have also plummeted, bringing all readings except for the 12- to 24-month one to at or near their lowest levels in the last couple years.

Taking this at face value, it seems the chances of a recession happening soon are diminishing.

But let’s dig a little deeper. What exactly is the data being charted by these lines? Bloomberg’s recession predictor blends a lot of information, but the factor that has caused the red and black lines above to fall steeply is US Treasuries.

The Yield-Curve Horror

A couple weeks ago, I took a close look at the “yield-curve panic” that has been facing markets in 2018. If you were paying attention in February and March, when the markets sold off, you’ll remember that the bears couldn’t stop talking about the flattening yield curve—specifically, the difference between 2-year and 10-year Treasury yields.

When this yield curve inverts (or when 2-year yields are higher than 10-year yields), a recession tends to follow in the next 12 months. And that curve has gotten flatter throughout 2018—up until my article a couple weeks ago, which said that “An inverted yield … isn’t coming yet.”

Recession Indicator Pulls a 180

Notice how this isn’t the first time that downward trend suddenly saw a reversal. The same thing happened in February.

But this time is different.

Back then, the widening yield curve happened during a sharp, sudden decline in stocks; and while stocks have had a rough few days, the decline we’ve seen (as I write, we’re just 6.7% down from the all-time high the S&P 500 set on September 20) is still well below the 10.1% plunge we saw in February. What’s more, compared to February, the current market downturn has lasted longer and been much less severe:

To call this the start of a bear market is just silly. What we are seeing over the longer term is a new trend: higher stock prices happening alongside a steeper yield curve.

This is a really good pattern to see.

Steep yield curves indicate higher expectations for inflation and, more crucially, economic growth. Just as negative yield curves are the market saying a recession is going to come, a positive yield curve is the market saying growth is going to get faster.

And what benefits when the economy is growing faster? Stocks.

A 6.9% Dividend From Your Favorite Blue Chips

So what should you buy?

An index fund like the S&P 500 SPDR ETF (SPY) would get you exposure to the stocks that will win in such a market, but you can compound your gains and get a higher total return by buying an equity fund that’s trading at a large discount to its portfolio value, or NAV.

While ETFs almost never trade below their NAVs, closed-end funds (CEFs) do—and that unusual inefficiency in CEFs is an opportunity for contrarian investors to get high-quality stocks at a discount.

For example, the Dividend and Income Fund (DNI) has a 7.2% dividend yield while also holding high-quality stocks like Apple (AAPL), CVS Health (CVS) and AutoZone (AZO), but it trades at an almost unthinkable 24.8% discount to NAV, meaning $1 of those shares is up for sale with DNI for just 75.2 cents.

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Source: Contrarian Outlook