For the first half of 2022, the S&P 500 fell 20.6%, its worst showing since 1970.
The U.S. inflation rate for June was 9.1%. Economists are looking for it to go even higher in the months ahead.
At the end of July, the Federal Reserve hiked its Fed Funds rate 75 basis points, the second consecutive time it’s done so. The benchmark Fed Funds rate is what the Federal Reserve charges banks for overnight borrowing.
On top of that, a blowout nonfarm payroll jobs report for June showed an increase of 528,000 jobs, while the unemployment rate declined to 3.5%. On average, economists were looking for an increase of 258,000 jobs and an unemployment rate of 3.6%.
So there’s basically runaway inflation, rising interest rates and a booming economy — many economists are suggesting people ignore the second consecutive quarterly decline of the U.S. gross national product.
So what’s an investor to do?
To begin with, if you own real estate, hang on to it. Inflation will eventually increase the value of your holdings, even though real estate sales may have slowed. The same holds true with equity real estate investment trusts (REITs) you may already own. A real estate developer once said that real estate is the best thing to own in an inflationary environment.
But what if your current traditional investments like stocks and mutual funds have collapsed in value, and your bonds and bond fund income doesn’t come close to the current inflation rate? What can you transition your investment dollars into?
Looking for ways to boost your returns? Check out Benzinga's coverage on Alternative Real Estate Investments:
- This High-Yield Real Estate Fund Is Targeting A 12%-18% Annualized Return
- This Little Known REIT Has Produced Double-Digit Annual Returns For The Past Five Years
- You Can Become Part-Owner Of This Cash-Flowing Multifamily Real Estate Portfolio
A number of REITs pay dividends at or near 8%
These REITs may not exactly match the inflation rate, but they will definitely help you keep your head above water, especially when you realize their portfolios will also appreciate in this inflationary environment. Remember, too, that the higher the yield, the more important it is to make sure the REIT can afford to pay out so much.
Here are four REITs you may want to check out:
KKR Real Estate Finance Trust Inc. Opening Price Per Share On Aug. 12: $19.58
KKR Real Estate Finance Trust Inc. KREF is a mortgage real estate investment trust. It mostly focuses on originating and acquiring senior commercial real estate loans. KKR originates and purchases credit investments related to commercial real estate, including leveraged and unleveraged commercial mortgage loans and commercial mortgage-backed securities.
KKR’s current dividend payout is 8.93%. Its five-year dividend payout average is 8.12% and has a payout ratio of 90.53. Its book value is $24.67 per share, with a current ratio of 151.73.
KKR seems to be a solid mortgage REIT that, on its current track, can support its dividend for a long time to come.
Arbor Realty Trust Inc. Opening Price Per Share On Aug. 12: $15.58
Nareit.com describes Arbor Realty Trust Inc. ABR as a mortgage REIT:
Arbor Realty Trust Inc. is a nationwide REIT and direct lender, providing loan origination and servicing for multifamily, single-family rental (SFR), seniors housing and other diverse commercial real estate assets. Headquartered in New York, Arbor manages a multibillion-dollar servicing portfolio, specializing in government-sponsored enterprise products. Arbor is a Fannie Mae DUS® lender, Freddie Mac Option Seller/Servicer and an approved FHA Multifamily Accelerated Processing (MAP) lender. Arbor’s product platform also includes CMBS, bridge, mezzanine and preferred equity lending. Arbor’s current dividend payout is 9.97%, which exceeds the current rate of inflation. Its five-year dividend payout average is 8.94% and has a payout ratio of 71.57. This mortgage REIT’s book value is $12.74 per share, with a current ratio of 3.91.
AFC Gamma Inc. Opening Price Per Share On Aug. 12: $18.30
AFC Gamma Inc. AFCG is a recently established company that originates, structures, underwrites and invests in senior secured and other kinds of loans and debt securities for established cannabis companies in states that have legalized medicinal or adult-use cannabis.
AFC’s current dividend payout is 12.73%. Its payout ratio is 100.54%. Although some might consider that payout ratio too risky, the ratio may decrease as the cannabis industry matures. AFC’s book value is $17.05 per share, with a current ratio of 21.73.
1st Streit Office
Finally, here’s information about 1st Streit Office, a relatively new equity REIT from Streitwise. Streitwise is not involved in crowdfunding but offers a private REIT that is not publicly traded. Investors buy shares in Streitwise’s 1st Street Office Inc., a managed portfolio of office properties.
Although it has an annual 2% management fee that comes out of its dividends, the minimum investment and time frame is $5,000 for one year. You don’t need to be an accredited investor to buy shares in the REIT, but your investment must be less than 10% of your net worth (not including your house) and less than 10% of your annual income. Its current annualized dividend rate is 8.4%, while its average return since 2017 is 9.2%.
You can browse other private and non-traded REITs with Benzinga’s Real Estate Offering Screener.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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