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3 Safe Haven REITs for Dividend Investors to Buy in September

Benjamin Rains

Global economic uncertainty remains and we still seem somewhat far away from a true resolution to the ongoing U.S.-China trade war, even though new talks are scheduled. Wall Street now has its sights set on what the U.S. Federal Reserve will do next.

Many analysts and traders expect the Fed will cut its benchmark interest rate for the second time in three months on Wednesday, after the central bank’s two-day policy meeting ends. Despite projected preventative rate cuts, the S&P 500 has surged 18% in 2019 and is back near its July highs. Therefore, it doesn’t seem like time to get out of stocks.

However, investors might want to consider finding a few stocks that provide solid income, especially amid our current low interest rate environment. One safe-have class of dividend-paying stocks that investors might want to consider are REITs.

Real Estate Investment Trusts are companies that own, operate, or finance real estate properties that produce income, such as apartment complexes or retail locations. These companies are heavily regulated and must meet a number of qualifications to be classified as a REIT. We should note that instead of earnings, REITs report funds from operations or FFO, but investors can view them as essentially the same for our purposes.

Meanwhile, one distinct advantage is that REITs must pay at least 90% of their taxable income in dividends to shareholders. Clearly, this means REITs are great options for income investors. With the yield on the 10-year U.S. Treasury note at 1.81%, let’s dive into three REITs, with strong Zacks Ranks, that we found using our Zacks Stock Screener…

1. City Office REIT CIO

City Office invests in “high- quality” office properties in mid-sized metropolitan areas that it deems to have strong economic fundamentals. CIO’s portfolio currently includes 64 office buildings, with a total of roughly 5.7 million square feet of net rentable area, across growing cities such as Phoenix, San Diego, Denver, Dallas, Seattle, and elsewhere. City Office topped our second-quarter FFO and revenue estimates in early August and its stock price has soared 37% in 2019 to crush its industry’s 21% average climb. Taking a longer-term view, CIO stock is up 11.5% over the past three years, against its industry’s 5% average climb.

Shares of CIO are currently trading right near their 52-week highs at $14 per share. Yet, along with the under $20 per share price tag, and impressive climb, comes an annualized dividend of $0.94 per share. Plus, City Office’s dividend yield sits at 6.8% at the moment, which crushes the 10-year U.S. Treasury. Our current Zacks Consensus Estimates also call for CIO’s full-year revenue to jump 22%, with fiscal 2020 projected to come in 8% higher. Meanwhile, its fiscal 2019 and 2020 FFO figures are expected to jump and it has seen a number of positive revisions. City Office is currently a Zacks Rank #2 (Buy) that boasts “B” grades for both Growth and Value in our Style Scores system.

2. Safehold Inc. SAFE

Safehold is a ground lease-focused REIT that aims to help owners of multifamily, office, industrial, hospitality and mixed-use properties in major U.S. markets “generate higher returns with less risk.” The New York-based firm saw its second quarter 2019 revenue skyrocket 70% from the year-ago period to $19.7 million, while net income soared 237%. The company upped its 2019 investment target by 33%, “reflecting increased deal flow and expected investment levels during the second half of the year.” Safehold also recently announced its first investment in Hawaii, and SAFE stock has popped 9% since then.

Shares of Safehold have now surged 67% in the past 12 months, against its industry’s 10% average climb. SAFE stock is also up 60% in 2019, yet still sits a few dollars off its 52-week highs at $30.70 per share. The company’s dividend yield isn’t as impressive as CIO’s, but given its insane 2019 run, its 2.1% yield is strong. Safehold’s full-year fiscal 2019 revenue is projected to jump 84%, with its bottom-line expected to climb 80.4%. The firm’s 2020 growth estimates show signs of continued double-digit expansion, and SAFE stock is a Zack Rank #1 (Strong Buy) at the moment. 

3. Industrial Logistics Properties Trust ILPT

As its name suggests, Industrial Logistics Properties is a REIT that owns and leases industrial and logistics properties throughout the United States. The Newton, Massachusetts-based firm as of June 30 owned nearly 300 industrial and logistics properties for a total of 42.4 million rentable square feet. Yet, of course, the square footage wouldn’t matter if it wasn’t full. But investors should be pleased to hear that ILPT had leased 99.3% of this space to 265 different tenants.

Industrial Logistics Properties shares are up 11% in 2019 and 9% over the last three months, which outpaces its industry’s 1.8% average jump. Industrial Logistics Properties stock closed regular trading Tuesday at $21.85 a share, and ILPT currently pays an annualized dividend of $1.32 per share, for a yield of 6%. Looking ahead, the firm’s quarterly FFO is projected to pop 15.5% on the back of 50% revenue growth. The firm’s fiscal 2019 revenue is then projected to jump 40%, with FFO expected to come in 10% higher. Industrial Logistics Properties is also currently a Zacks Rank #1 (Strong Buy).

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