I have an IRA which was 2/3rds in FAX (First Australia Prime) and 1/3rd in cash. For the 1/3rd in cash, I was looking for something with a yield of over 8% and a potential price growth of 12 to 15 % per year. I was looking at a 3 year time horizon.
With REITs in a bear market, which might end this year, I searched this market for reasonably assured opportunities. I went through Value Line, Morningstar, searched the internet for business articles on the REIT market, used Hoover, Zacks and Yahoo for searches and lastly went to the Yahoo message boards!
What was my conclusion from this exercise? It was that FAX had a more assured, less risky future than the REITs including MAA! Yesterday, 2/26, I invested the last 1/3rd of this IRA in FAX @ 5 7/8 with a yield of ($.72/$5 7/8)x100 = 12.255% My arithmetic for FAX based on Value Line and other sources for the next 3 years is as follows:
The next 12 months: To 3/2000 Yield = .72 for year = 12.255%; target price of stock = 1.12 X 5.875 = $6.58; Total Return = 24.25%
Year end 2: To 3/2001 Yield = 1.125 x .72 = .81/yr = 12.25%; target price of stock = 1.12 X 6.58 = $7.3646; Total return = 24.25%
Year end #3: To 3/2002 Yield = 1.125 x .81 = .91/yr; target price of stock = 1.12 X 7.364 = $8.248; Total return = 24.25%
The further out the forecast, the higher the risk of error. For year end #3: 3 /2002 a yield of $.91/yr/shr may be high, the stock price of $8 1/4 looks reasonable. Should they have a dilutive rights offering as this past fall, then all bets are off, and I would sell all or most at the first hint of such an event! This projection is near consistent with value line projections. Anyway this projection seems more assured then those I could make for the REITs I looked at including MAA! There will of course be bumps along the way.
I am 76 years of age and with mandatory withdrawals from my IRA, the above forecasts do not include any reinvestment of dividends. Since this is an IRA, the foreign tax of .004/shr/mo is not deductable for income tax purposes. .004 X 1000 x 12 = $48/1000 shrs. or for 10,000 shares = .004 x 10000 x 12 = $480 per year.
Too late to buy now. I unfortunately sold most of mine a while back. What is interesting is the offers they are "supposedly" getting. Stock was $9.6875 yesterday and up $1.125 today due to release that they have received offers on the whole REIT. They released that part of present management had offered $11.05 in cash and the outside directors said they had other offers and management's offer was insufficient - making one think that some of the other offers were higher.
On a valuation level, I don't think that BRI has been that much cheaper than MAA recently and after today's rise in BRI, MAA is probably cheaper. I think this illustrates the depressed share price of most REITs. Although it is easy to be patient with a yield over 10%, I still wish management would do something to realize the value in MAA.
FAX scares me. They have too much of their money in overseas bonds which change value with exchange rates. Sure, the dividend is high, but unless you are going to Australia you just don't know how much of your $5.75 you will get back when exchange rates change!
I would stick with MAA, although the charts on many REITs look absolutely dismal. FFO is great, and the outlook for earnings on these stocks isn't that bad.