Well-known large-cap stocks are often the ones that get all the media attention, but sometimes it's the smaller companies are performing the best while the big names are struggling.
To some degree, that's what's happening in the real estate investment trust (REIT) sector in recent weeks, as big names like Realty Income Corp. (NYSE:O), W.P. Carey Inc. (NYSE:WPC), SL Green Realty Corp. (NYSE:SLG), Prologis Inc. (NYSE:PLD) and others have been slashed in price or are just treading water. Meanwhile, some smaller REITs are sneaking up in price without anyone taking notice.
Take a look at three small-cap REITs that have been performing well that investors may want to put on their radar screens.
Strawberry Fields REIT Inc. (NYSEAMERICAN: STRW) is a self-managed and self-administered healthcare REIT that owns and operates 83 triple-net skilled nursing facilities, assisted living and other post-acute healthcare properties in Arkansas, Illinois, Indiana, Kentucky, Michigan, Ohio and a few other states. Strawberry Fields REIT was founded in 2004. After trading over the counter for a long time, it began trading on the New York Stock Exchange (NYSE) in February. Its market cap is $340.29 million.
Strawberry Fields pays a quarterly dividend of $0.11 per share. The annual dividend of $0.44 yields 6.29%. Its payout ratio is a manageable 67.3%.
On Aug. 15, Strawberry Fields REIT announced its second-quarter operating results. Funds from operations (FFO) of $12.7 million was up from $12.6 million in the second quarter of 2022, and rental income rose to $24.3 million in the second quarter of 2023 from $21.8 million in the second quarter of 2022.
There has been no recent news to propel this stock higher, but over the past five trading days, Strawberry Fields REIT has led all REITs with a 14.31% return. Healthcare REITs in general have been outperforming the other REIT subsectors in recent weeks.
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Hannon Armstrong Sustnbl Infrastructure Capital Inc. (NYSE:HASI) is an Annapolis, Maryland-based mortgage REIT (mREIT) that is considered to be a specialty REIT. It provides mortgage loans for renewable energy projects and owns stakes in a portfolio of solar and wind projects as well as other energy-efficient endeavors. Its business model and $4.9 billion portfolio are designed to invest in energy transitions that will improve the climate future. Hannon Armstrong joined the S&P Small Cap 600 in mid-September. Its market cap is $1.91 billion.
Hannon Armstrong's shares peaked at $64.30 in January 2021 and have declined significantly since then, with a dismal total return of 72.5%.
To its credit and unlike many other mREITs, Hannon Armstrong has never cut its dividend during the decline. Over the past 10 years, Hannon Armstrong has grown its dividend 558% from $0.06 per share to $0.395 per share with no suspensions or cuts. The forward annual dividend of $1.58 per share yields 8.97%, but the payout ratio is manageable at 76.24%.
Hannon Armstrong hit bottom on Oct. 6 at $13.22. But on Oct. 10, Baird analyst Ben Kallo chose Hannon Armstrong as a Fresh pick and reiterated an Outperform rating on the REIT. Kallo cited its portfolio diversity, strong financials and smaller exposure to interest rate risks for his bullish comments.
On Oct. 11, Muddy Waters Research founder Carson Block announced he closed his firm's short position on Hannon Armstrong when his artificial intelligence (AI) model said to exit the position.
On Oct. 17, Morgan Stanley upgraded Hannon Armstrong from Equal-Weight to Overweight and set a $23 price target. On Oct. 20, BNP Paribas Exane initiated coverage on Hannon Armstrong with an Outperform rating and a $29 price target.
These events sparked a turn-around in Hannon Armstrong's performance, and since that bottom day on Oct. 6, the REIT has risen a solid 33.2% to lead all REITs in total performance.
Bluerock Homes Trust Inc. (NYSEAMERICAN: BHM) is a New York-based diversified REIT that owns 173 residential and 21 industrial properties worth over $15 billion. It owns single-family rental homes and build-to-rent communities across 10 states. It was founded in 2002 and has a market cap of $53.39 million. The REIT went public on Sept. 28, 2022.
Bluerock has performed poorly in 2023, falling from $23 per share in February, to a recent low of $12.25 on Oct. 13. But shares have rebounded 12.4% since then, putting Bluerock among the leaders of the total REIT universe.
On Aug. 25, Bluerock Homes Chief Financial Officer and Treasurer Christopher J. Vohs showed his faith as he purchased 12,000 shares of company stock for $270,000.
Investors should note that Bluerock does not yet pay a common stock dividend, but it announced on October 13 that it will pay three monthly Class A preferred dividends for the fourth quarter of 2023, equal to a quarterly dividend of $0.375 per share. The present annualized yield is 10.89%.
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