High inflation, rising interest rates, and economic uncertainties have discouraged home buyers this year. However, increased regional population distribution, rising demand for rental properties, and appreciating property prices bode well for real estate investment trusts (REITs).
In addition, the inclination of businesses toward local sourcing after the pandemic is expected to drive further growth in this sector. The real estate sector in the United States is projected to grow at a 3.7% CAGR to $412.60 billion by 2025.
Moreover, REITs are considered safe investments in uncertain times since they must pay at least 90% of their taxable income as dividends.
Therefore, we think investing in fundamentally sound REITs LTC Properties, Inc. (LTC) and Getty Realty Corporation (GTY) could offer diversification, inflation hedge, and superior dividend returns to long-term investors.
LTC Properties, Inc. (LTC)
LTC invests in senior housing and healthcare properties. It invests in four broad segments: Skilled Nursing centers (SNF); Assisted Living Facilities (ALF); Independent Living Facilities (ILF); and Memory Care facilities (MC). Its operations include sale-leasebacks, mortgage financing, joint ventures, construction financing, and structured financing solutions.
On July 1, LTC declared a monthly cash dividend of $0.19 per common share for July, August, and September 2022. Its dividend payouts have grown at a 6.3% CAGR over the last three years and a 0.2% CAGR over the past five years. Its dividend payout ratio is 98.28%, while its current dividend translates to a 5.24% yield.
On May 12, LTC confirmed a $36 million investment for refinancing debt on four assisted living communities and a land parcel.
According to LTC’s Chairman and CEO, Wendy Simpson, “Year-to-date, LTC has used its flexibility and creativity to invest more than $110 million, with a current focus on newer construction. We will continue to identify new and strategic opportunities across a variety of financing vehicles to put our capital to work in a way that benefits all LTC’s stakeholders.”
LTC’s total revenues increased 12.8% year-over-year to $43.02 million in the fiscal 2022 second quarter ended June 30, 2022. Its operating income came in at $54.11 million, up 201.4% year-over-year. FFO attributable to common shareholders, excluding non-recurring items, amounted to $24.49 million, up 9.8% year-over-year. Its FFO per common share improved 12.3% year-over-year to $0.64.
The consensus FFO estimate of $2.53 for the fiscal year 2022 represents a 7.3% improvement year-over-year. The consensus revenue estimate of $161.80 million for the current year represents a 4.2% increase from the previous year. The company has surpassed the consensus revenue and FFO estimates in each of the trailing four quarters.
LTC has gained 27.9% over the past six months and 23.2% over the past year to close the last trading session at $43.48.
LTC’s POWR Ratings reflect this stable outlook. The REIT has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
LTC is also rated B in Growth, Momentum, and Sentiment. Within the REITs – Healthcare industry, it is ranked #1 of 16 stocks. To see additional POWR Ratings for Value, Stability, and Quality for LTC, click here.
Getty Realty Corporation (GTY)
GTY invests in convenience stores, automotive service centers, and other single-tenant real estates, such as drive-through quick service restaurants. Its operations include acquisition, financing, and development, and it has a variety of national and regional brands as its tenants.
On July 27, GTY announced that its board of directors declared a dividend of $0.41 per share common payable on October 6 to holders of record on September 22. Its dividend payouts have grown at a 5.8% CAGR over the last three years and an 8.3% CAGR over the past five years. The stock’s four-year average dividend yield is 4.96%, while its current dividend translates to a 5.51% yield.
GTY’s total revenues increased 6.5% year-over-year to $41.18 million in the fiscal 2022 second quarter ended June 30, 2022. Its operating income came in at $37.34 million during the same period, up 98.2% year-over-year. Adjusted FFO amounted to $25.38 million, up 8.3% year-over-year. Its adjusted FFO per common share improved 1.9% year-over-year to $0.53.
The consensus FFO estimate of $2.10 for the fiscal year 2022 represents an 11.6% improvement year-over-year. The consensus revenue estimate of $163.45 million for the current year represents a 6.2% increase from the previous year. It’s no surprise that the company has topped the consensus FFO estimates in three of the trailing four quarters.
GTY has gained 5.4% over the past six months to close the last trading session at $29.74.
GTY’s POWR Ratings reflect this stable outlook. The company has an overall rating of B, which translates to a Buy in our proprietary rating system. It also has a B grade for Momentum, Stability, and Sentiment. In the 33-stock REITs – Retail industry, it is ranked #3.
Beyond what we’ve stated above, we have also given GTY grades for Growth, Value, and Quality. Get all the GTY ratings here.
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LTC shares were trading at $43.95 per share on Friday afternoon, up $0.47 (+1.08%). Year-to-date, LTC has gained 33.49%, versus a -10.05% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...
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