• A bullish trend for BPYU

• An attractive dividend to go with capital growth

• Diversification lowers risk and creates long-term gains

 

• Two other REITs with a commodity kicker

A real estate investment trust is a company that owns and often operates income-producing real estate. REITs own many property types ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels, and commercial forests.

A growth stock shares in a company that generates substantial and sustainable positive cash flow. Growth stocks have revenues and earnings that increase at a faster rate than the average company in the same industry. A REIT and growth stock are not mutually exclusive terms in finance.

Brookfield Property REIT Inc. (BPYU) is a subsidiary of Brookfield Property Partners LP, one of the world’s leading real estate companies with around $88 billion in total assets. BPYU is public security that offers economic equivalence to an investment in a limited partnership. At the end of last week, BPYU had a market cap of $593.986 million and traded an average of over 600,000 shares each day, making it liquid security that is both a REIT and a growth stock.

Weyerhaeuser Company (WY) and the CatchMark Timber Trust (CTT) are REITs that own timberlands that could also be growth stocks for 2021.

A bullish trend for BPYU

In March 2020, when all hell was breaking loose in the stock market, BPYU dropped to a low of $7.15 per share. Since then, the stock has made a series of higher lows and higher highs.

Source: Barchart

At the end of last week, BPYU was trading at the $15.18 level, double the price at the March low. The all-time peak in the stock came in April 2019 at $21.19.

An attractive dividend to go with capital growth

BPYU aims to deliver long-term returns on equity of 12%-15%. At $15.18 per share, the REIT pays shareholders a $1.33 dividend, translating to an 8.76% yield. The stock is mostly held by institutions. The track record of quarterly revenues and earnings reflects the commercial real estate market’s challenging conditions in 2020. The pandemic has weighed on the company’s financials.

Source: Yahoo Finance

As the chart illustrates, the REIT had a tremendous fourth quarter in 2019, but revenues moved lower, and the company reported losses over the first three quarters of 2020. Meanwhile, the company should return to profitability in the pandemic’s aftermath because of real estate asset diversity.

Diversification lowers risk and creates long-term gains

Brookfield is a diversified and global real estate company with a portfolio that includes approximately 2,000 assets in thirty countries. It owns and operates a portfolio of office, retail, multifamily, industrial, hospitality, student housing, and manufactured housing assets. BPYU trades as public security, while the parent company BPY is a limited partnership with a market cap of $13.536 billion and the same dividend of $1.33 per share, which equates to 9.26% at $14.52 at the end of last week.

Source: Yahoo Finance

BPY’s revenue and earnings trajectory has been higher from 2016-2019. 2020 has been a challenge for the REIT as the commercial real estate market ran into a pandemic. BPY is the parent company. An average of six analysts on Yahoo Finance has a price target of $16.25 on the stock with a range from $12 to $18 per share.

BPYU should reflect the performance of the REIT over the coming year. An over 8% dividend with the potential for capital growth is an attractive proposition going into 2021. BPYU is a REIT that has been a growth stock since March 2020. The trend is always your friend in markets, and the trend in BPYU suggests that the shares should continue to rise and test the record peak at $21.19.

Identifying attractive opportunities for the coming year is no easy task in a stock market on the highs. BPYU is a stock that offers an attractive dividend that will pay investors while they wait for capital growth.

Two other REITs with a commodity kicker

Timberlands are real estate. Weyerhaeuser Company (WY) has a market cap of $25.266 billion, trades an average of over four million shares each day, and pays a 2.51% dividend at $33.85 per share. WY owns or controls approximately eleven million acres of timberlands in the US and manages additional properties under long-term lease licenses in Canada.

Source: Yahoo Finance

WY has been consistently profitable over the past four consecutive quarters, beating consensus estimates over the past three.

Source: Barchart

WY reached $13.10 in March 2020. At $33.85 at the end of last week, the stock has made higher lows and higher highs over the past nine months.

The CatchMark Timber Trust (CTT) owns interests in 1.5 million acres of timberlands in Alabama, Florida, Georgia, North Carolina, Oregon, South Carolina, and Texas. CTT has a market cap of $451.081 million, trades an average of over 274,000 shares each day, and pays shareholders a $0.54 dividend. At $9.25 per share at the end of last week, CTT has a 5.84% yield.

Source: Yahoo Finance

The chart shows that CTT reported losses over the past four consecutive quarters, but that could change given the lumber market’s strength.

Source: Barchart

The chart shows that CTT shares rallied from $5.13 at the March low to $9.25 at the end of last week.

Source: CQG

The semi-annual chart of lumber futures shows that the price of wood rose to an all-time peak of $1,000 per 1,000 board feet in September and was over the $880 level at the end of last week, not far below the record high. The strength in the lumber market could make WY and CTT both REITs and growth stocks for 2021.

A REIT can be a growth stock if its assets appreciate. The dollar’s decline, central bank liquidity, and government stimulus all point to inflationary pressures that could increase the value of the real estate and BPYU, WY, and CTT’s portfolios.

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WY shares were unchanged in premarket trading Tuesday. Year-to-date, WY has gained 13.65%, versus a 17.79% rise in the benchmark S&P 500 index during the same period.

About the Author: Andrew Hecht

Andy spent nearly 35 years on Wall Street and is a sought-after commodity and futures trader, an options expert and analyst. In addition to working with StockNews, he is a top ranked author on Seeking Alpha. Learn more about Andy’s background, along with links to his most recent articles. More...

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