The Federal Reserve recently raised its benchmark interest rate by 50 basis points, the most significant since 2000, and could get even tougher with rate hikes to combat high inflation. In addition, recession worries and the ongoing Russian-Ukraine war should keep the stock market under pressure in the near term. Amid this environment, investors could turn toward residential REITs to hedge their portfolios, as they offer a steady income stream through dividends.
Therefore, it could be wise to bet on quality REIT stocks National Retail Properties, Inc. (NNN) and Ladder Capital Corp (LADR), which have more than 4% dividend yield. These two stocks have declined lately but hold solid upside potential.
National Retail Properties, Inc. (NNN)
NNN invests primarily in high-quality retail properties subject generally to long-term, net leases. The company owns 3,114 properties in 48 states with a gross leasable area of approximately 32.40 million square feet and with a weighted average remaining lease term of 10.70 years.
On April 14, 2022, NNN’s Board of Directors declared a quarterly dividend of 53 cents per share payable on May 16, 2022, to common shareholders of record on April 29, 2022.
NNN’s revenue increased 5.8% year-over-year to $190.28 million in the first quarter, which ended March 31, 2022. The company’s net earnings came in at $81.37 million, representing a 56.2% year-over-year increase. Also, its EPS came in at $0.46, up 53.3% year-over-year.
Analysts expect NNN’s EPS to increase 16.6% year-over-year to $1.76 in fiscal 2022. In addition, it surpassed Street EPS estimates in three of the trailing four quarters. Its revenue is expected to be $793.14 million in fiscal 2023, representing a 5% year-over-year rise. The stock declined 6.1% year-to-date to close yesterday’s trading session at $45.11.
The company pays an annual dividend of $2.12, translating into a 4.7% yield.
NNN’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
The stock has a B grade for Quality, Momentum, and Growth. Within the REITs – Retail industry, NNN is ranked #6 out of 33 stocks. Click here to see NNN’s ratings for Stability, Value, and Sentiment as well.
Ladder Capital Corp (LADR)
LADR qualifies as a REIT for federal income tax purposes. Its Loans segment originates conduit first mortgage loans secured by cash-flowing commercial real estate. At the same time, its Securities segment invests in commercial mortgage-backed securities and the U.S. Agency Securities. Also, Its Real Estate segment owns and invests in a portfolio of commercial and residential real estate properties.
On May 3, 2022, LADR announced an improved outlook by S&P Global Ratings. LADR’s CEO, Brian Harris, said, “Ladder is pleased to see S&P’s positive outlook on the Company and recognition of our large component of long-dated, unsecured, fixed-rate liabilities. With over half of our current financing being fixed-rate, coupled with our predominantly floating-rate asset base, Ladder’s net interest income is well-positioned to benefit from rising short-term interest rates, and should in turn allow us to increase distributions to shareholders in the coming quarters.”
LADR’s other income increased 32.7% sequentially to $65.24 million in the first quarter, which ended March 31, 2022. Its total assets came in at $5.97 billion for the period ended March 31, 2022, compared to $5.85 billion for the period ended December 31, 2021. The company’s distributable earnings grew 13.8% sequentially to $31.53 million. Also, its distributable EPS came in at $0.25, up 19% sequentially.
For the current quarter ending June 30, 2022, analysts expect LADR’s EPS and revenue to increase 150% and 59.1% year-over-year to $0.25 and $59.78 million, respectively. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has lost 3.5% to close yesterday’s trading session at $11.68.
The company pays an annual dividend of $0.80, translating into a 6.9% yield.
LADR’s POWR Ratings reflect its solid prospects. The company has an overall rating of B, which translates to a Buy in our proprietary rating system. In addition, it has an A grade for Sentiment and a B grade for Momentum.
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NNN shares were trading at $44.24 per share on Thursday afternoon, up $0.87 (-1.93%). Year-to-date, NNN has declined -5.72%, versus a -12.60% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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