Two REITS that are steady growers at a good price for dividend investing success

A couple of good REITs for investing and dividend investing success

I enjoy investing in slow and steady-growing stocks that pay dividends. That much is clear. There are many types of stocks that fit the bill and here are several real estate investment trusts (REITs) that fit the bill for me. I look for those with a developed (or steady) track record for good dividend payouts and growth. As we can expect, the growth that we see in many B2B or B2C companies is not present in most REITs but they can still expand at a rate that grows my wealth. Tihs is a key approach that I use in my investing and dividend investing.

Top five reasons to love dividend stocks, investing and dividend investing

Why you should love investing and dividend investing There are many reasons that you might love dividend
In contrast to other dividend stocks, much of the long-term growth that I expect to see will come from the payment of dividends. For both these stocks today, they have a different sector focus and different challenges and risks going forward. Here, I am presenting only a rapid look at their current situation, focusing on dividends and valuation (as judged using P/AFFO). These both look relatively undervalued at the moment, with good dividend yields and DGRs. These are all reasons that I enjoy dividend growth investing.

Investing and dividend investing

Triple-net lease STORE Capital (STOR)

This is not all good news – most triple net lease contracts include a rent escalation of only a few percent per year. This is clearly insufficient, at the current inflation rates, to sustain purchasing power from cash flows to the REIT. However, the Fed appears to be aggressively moving to bring inflation back down again. I expect STOR to continue to grow and acquire further properties. This outlook appears to be supported by most analyst expectations for the growth in the AFFO (Figure 1). We see the expected growth in AFFO that proves to be steady and reliable. Couple that with the current dividend yield (5.65%) and this makes for a compelling (slow and steady) compounded. The 5-year DGR is approximately 5.85%. When both yield and 5yDGR are above 5% I tend to be quite interested, particularly with the P/AFFO (similar to the PE for a REIT) being only 12.8. In terms of valuation, this P/AFFO level is below the dark blue line (Figure 1) representing the historic ratio this stock trades at; the current indication suggests that it is undervalued. This is a relatively newer REIT, however, with only seven years of continued growth in dividends. It may contribute over time to investing and dividend investing success.

With the estimates from FASTGraphs, based on analyst estimates, this investment will return approximately 30% by the end of 2024, from the current price, or approximately 10.9% annual return.

Figure 1. STOR; AFFO projections and estimates for the coming years. Source: FAST Graphs based on FACTSEC data.

 

Medical Properties Trust (MPW)

MPW is another of my favourite REITs. It is a slow-and-steady grinder, with nine years of dividend growth. Here, the 5yDGR is only just below 4% but the current yield is 6.7%. This ticks my box for slightly higher income now and slow growth over the future. As seen in Figure 1, it is trading below the usual valuation that the stock exhibits, at a 12.35 P/AFFO. (A similar value to STOR, above, which is a coincidence.) The valuation, compared to the usual valuation (dark blue line in Figure 1) looks good. Based on the FASTgraph calculator, the expected total return using analyst estimates will be approximately 40% by the end of 2024, giving an annual return of approximately 14%.

The specifics of the sector, being a landlord to many hospitals, suggest some level of uncertainty even now with the pandemic slowly diminishing. Long-term, however, with an aging population that continues to expand, the fundamentals for this business continue to look good.

Figure 2. MPW; projections and forecasts from analysts for the AFFO for the next several years. Source: FASTGraphs and FACTSEC data.

A couple of good REITs for investing and dividend investing success I enjoy investing in slow and steady-growing stocks that pay dividends. That much is clear. There are many types of stocks that fit the bill and here are several real estate investment trusts (REITs) that fit the bill for me. I look for those…

A couple of good REITs for investing and dividend investing success I enjoy investing in slow and steady-growing stocks that pay dividends. That much is clear. There are many types of stocks that fit the bill and here are several real estate investment trusts (REITs) that fit the bill for me. I look for those…

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