If you follow income stocks like real estate investment trusts (REITs) on a regular basis, you will undoubtedly hear a lot about the larger and more popular REITs, such as Realty Income Corp. O, WP Carey Inc. WPC, Equinix Inc. EQIX, Prologis Inc. PLD and others.
But often, it’s the lesser-known stocks that can produce the best total performance if they have been growing their earnings or dividends. Earnings and dividend growth often drive stock prices higher, regardless of the popularity of a particular issue.
Take a look at three REITs from different subsectors that have beaten every other REIT over the past year and the forces that are driving them higher.
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Service Properties Trust SVC is a Newton, Massachusetts-based diversified REIT with a portfolio of 220 hotels and 765 service-focused net lease retail outlets that covers 46 states, Puerto Rico and Canada.
Service Properties has reported two excellent quarters so far in 2023, as hotel occupancy and revenue per available room (RevPAR) have been increasing.
On Feb. 28, fourth-quarter funds from operations (FFO) of $0.44 beat the analysts’ view by $0.08 and was up 158% from FFO of $0.17 in the fourth quarter of 2021. Revenue of $455.22 million beat Wall Street’s view by $10.35 and was 8% ahead of revenue of $421.38 million in the fourth quarter of 2021.
On May 9, the first-quarter FFO of $0.23 was a 1,250% increase over negative $0.02 in the first quarter of 2022. Revenue of $429.21 million beat the analysts’ estimate of $412.41 million and was a 9% increase over the first quarter of 2022. RevPAR has recently climbed from $96.21 to a second-quarter projected range of $97 to $103.
On June 1, Service Properties Trust announced it has acquired the Nautilus Hotel in Miami Beach, Florida for $165.4 million. The Nautilus is a 250-room oceanfront luxury hotel that will undergo a $25 million repositioning in the summer of 2024 and reopen in 2025 with the new name “Nautilus Sonesta Miami Beach.”
Over the past 52 weeks, Service Properties Trust has had a total return of 71.81%. The quarterly dividend is $0.20, and the annual dividend of $0.80 yields 9%.
Tanger Factory Outlet Centers Inc. SKT is a Greensboro, North Carolina-based retail REIT that owns 37 shopping centers, with 14 million square feet and over 2,700 stores across 20 states. Many of its shopping centers are outlet malls. Its initial public offering (IPO) was in 1993.
Recent developments have been quite positive. On April 11, Tanger increased its quarterly dividend by 11.3% from $0.22 to $0.245 per share. The annual dividend of $0.98 presently yields 4.5%.
On April 27, Tanger reported first-quarter operating results. FFO of $0.46 was a penny above the first quarter of 2022 and beat the analysts’ estimates of $0.44. Revenue of $108.94 million beat the estimates of $108.72 million and was up from $108.87 million year over year. Tanger also raised its full-year 2023 guidance for core FFO per share.
On May 31, Evercore ISI Group analyst Samir Khanal maintained an In-Line rating for Tanger Factory Outlet Centers and raised the price target from $20 to $22.
Positive developments like these are why over the past 52 weeks, Tanger Factory Outlet Centers has had a total return of 55.57%.
Apartment Investment and Management Co. AIV is a Denver-based diversified REIT that owns, leases and manages apartment complexes. AIMCO, as it now calls itself, 6,000 units totaling 14 million square feet across the U.S., and its assets under management total $3.5 billion. AIMCO also has over $5 billion in pipeline development, mostly in Florida, Washington D.C., and Aurora, Colorado. It also has a strong presence in the Miami and Fort Lauderdale areas in Florida.
AIMCO’s average daily occupancy rate in the first quarter of 2023 was 98.5%, up from 97.4% in 2022. AIMCO had 10.6% revenue growth and 14.2% growth in net operating income (NOI). Looking forward, AIMCO sees 5% to 7% additional revenue and NOI growth in 2023. One of its successfully completed goals in the past year was to reduce total leverage, and it has done that by $400 million.
Recently AIMCO has been pressured by activist hedge fund Land & Buildings, which owns 6% of AIMCO. Land & Buildings has been critical of AIMCO’s performance and would like to see the REIT explore a potential sale of the company in the $11- to $13-per-share range. From its most recent close of $8.45, that would be a substantial gain.
Over the past 52 weeks, AIMCO has had a total return of 44.54%. The annual dividend of $0.08 yields less than 1%.
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