Skip to main content

Number Cruncher Eighteen dividend-paying U.S. real estate stocks that deserve a closer look

What are we looking for?

History suggests that the U.S. real estate sector performs better than its Canadian counterpart in a rising interest-rate environment because of the shorter term nature of U.S. lease obligations. Generally speaking, this allows U.S. companies to pass on the increased costs associated with rising rates at a quicker pace. This prompted my associate Allan Meyer and I to take a closer look at the sector using our investment philosophy focused on safety and value.

The screen

We started with companies in the S&P 500 real estate sector with a market capitalization of $10-billion (U.S.) or more, sorted from largest to smallest. Market cap is a safety factor: Larger companies tend to be more liquid and stable.

Allan and I – and, more importantly, our clients – love to get paid while we wait for capital appreciation, and dividends generally reflect safety and stability. Yield is based on the projected annualized dividend a share divided by the share price.

When analyzing real estate investments, adjusted funds from operations (AFFO) is a key metric and often considered a better predictor than measures based on earnings or cash flow. It takes into account capital expenditures used to maintain the underlying real estate. The payout ratio is the dividend divided by the AFFO. A lower number implies safety of the dividend and may foreshadow a future dividend bump. Vice versa for a payout that's more than 100.

Debt to equity is a leverage ratio and safety measure. A lower number is better. As we like to tell clients, it's hard to go bankrupt without having any debts.

Price/AFFO is the current share price divided by the AFFO. It is a valuation metric: The lower the number, the better the value.

We then looked at the occupancy rate or the percentage of rented spaces compared with available space. A higher number is preferred.

Lastly, we've included the data's average and median numbers for easy comparison.

What did we find?

Ventas Inc., GGP Inc., Mid-America Apartment Communities Inc. and Regency Centers Corp. look attractive on most measures. The comparatively high debt levels on Simon Property Group Inc. should be noted.

Exchange-traded funds are an option for investors who like the sector but prefer to diversify away individual security risk. Two examples are iShares U.S. Real Estate ETF and Vanguard REIT Index Fund.

Investors should contact an investment professional or conduct further research before buying any of the securities listed here.

Sean Pugliese, CFA, is an investment portfolio manager at Wickham Investment Counsel, helping individuals, families and other investors.

Select U.S. real estate stocks

CompanyTickerMarket Cap ($Bil U.S.)Yield (%)Payout Ratio (%)Debt/Equity (%)P/AFFOOccupancy Rate (%)
Simon Property Group Inc.SPG-N48.84.661.7628.513.298.2
Public StoragePSA-N35.73.978.49.619.494.5
Prologis Inc.PLD-N33.72.862.974.622.197.0
AvalonBay Communities Inc.AVB-N25.93.065.668.021.095.5
Equity ResidentialEQR-N24.73.065.387.121.096.0
Ventas Inc.VTR-N24.44.575.9112.816.191.7
Digital Realty Trust Inc.DLR-N19.23.162.1128.818.789.4
Boston Properties Inc.BXP-N18.62.549.4176.119.090.2
GGP Inc.GGP-N18.34.260.8150.813.396.9
Essex Property Trust Inc.ESS-N17.62.659.889.721.696.6
Realty Income Corp.O-N15.84.483.785.618.498.3
Vornado Realty TrustVNO-N14.13.267.9156.720.595.6
HCP Inc.HCP-N14.05.078.1131.315.394.5
Mid-America Apt. Communities Inc.MAA-N12.13.357.572.517.195.9
Alexandria Real Estate Equities Inc.ARE-N11.42.855.592.619.096.6
Regency Centers Corp.REG-N10.93.357.752.417.296.0
Duke Realty Corp.DRE-N10.62.675.649.623.597.1
UDR Inc.UDR-N10.43.265.8125.720.096.7
Average20.33.465.8127.418.795.4
Median17.93.264.191.119.096.0

Source: Thomson Reuters Eikon, Wickham Investment Counsel Inc. 

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Latest Videos