🍨 Daily Scoop: Reliable REITs | Trade Stocks

Reliable REITs

By Mon, May 18, 2020

Hey Scoopers,

On Friday, the upward movement of the market wasn’t enough to push the 5-day return of the stock market indices into the green zone. — More on that in the “Overall Market” section.

Beyond the overall market, one online apparel retailer got a 10% boost, while another online apparel retailer fell by more than 11%. — More on that in the “What’s Up?” and “What’s Down?” sections.

Oh, by the way, which REITs are reliable? — More on that in the “Water Cooler” section.

But, first, here is a recap of what happened in the market last week:

Market Recap

  • U.S. markets: All three indices ended the last day of the week in the green. Scroll down to the “Overall Market” section to read more.
  • Cryptocurrency: Bitcoin’s price continues to hover slightly lower than the $10,000 mark.

 


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Not Enough

The stock market rebounded slightly on Friday but not enough to turn the week into the green. The 5-day return of all three indices was negative as investors were trying to get a sense of the likelihood of the reopening success. In the meantime, the unemployment rate in the U.S. is nearly 15%, and Congress is working on the feasibility of another round of stimulus cheques to keep the engine of the economy (a.k.a. Consumer spending) running.

 


Online Retail Is Up

So, what happened?

Shares of Stitch Fix (Ticker: SFIX) were up almost 10% on Friday. The company uses data analytics to sell personally curated packages of clothing items. It started as a subscription-based box, and it has now morphed into an online, personalized clothing shop. Surprisingly, as a new IPO, Stitch Fix is already profitable, its balance sheet is quite strong.

The stock price was hammered before COVID-19 and continued to drop for a while after the start of the COVID-19 pandemic. However, on Friday, the company’s stock saw a sudden large volume of trade, and options contracts followed. The excitement is most likely due to the 49% increase in the U.S. e-commerce sales as a result of the COVID-19 pandemic.



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Online Retail Is Down

So, what happened?

Shares of Farfetch (Ticker: FTCH) were down more than 11% on Friday. The company is an online platform connecting sellers and buyers of personal luxury goods. Earlier in May, the company announced its latest quarterly earnings report, and the revenue was up more than 90% year-over-year. The stock price decline is surprising to see, mainly because of the sharp growth of e-commerce due to the COVID-19 pandemic. Even financial analysts are surprised to see a price-drop. For example, analysts from Credit Suisse just upgraded their price target for Farfetch, sighting the significant market opportunity of luxury apparel as the main reason for the upgrade.


Can REITs Be Reliable?

So what happened here?

The COVID-19 pandemic has taken a toll on many sectors across the globe. The real estate sector is one of the hard-hit areas of the economy. As restaurants, bars, retail stores, and offices shut down around the world, landlords, property owners, and property management companies were faced with a massive decline in revenue. It was no surprise to see the S&P 500 Global REIT index fell by more than 34% since the middle of February.

In the normal situation, REITs are some of the most popular types of securities investors hold for their rich and reliable dividend income. Could REITs survive the COVID-19, and continue to be a source of income for investors? If yes, which ones?

Reliable REITs

During the weekend, we dug deep into the list of REITs traded in the U.S. exchanges. Out of 335 U.S.-listed REITs, we filtered out those with large amounts of liabilities. Among a few other criteria, we excluded those with high-interest expenses compared to their earnings (EBIT). We also focused on REITs with more than 1% dividend yield, which has been growing consistently in the last 3 and 5 years. The final was a list of eleven REITs that are most likely reliable enough to go through the COVID-19 pandemic and come out of it without the need to cut their dividends. Here are the top three:

  • American Tower (Ticker: AMT),
  • Prologis Inc (Ticker: PLD),
  • Equity Residential (Ticker: EQR),

Are you a dividend or REIT investor? Let us know by emailing us at members@tradestocks.com.

Disclosure: Authors of this Scoop own shares of American Tower (Ticker: TSLA) and Stitch Fix (Ticker: SFIX).
About the Author

Brought to you by Hoda Mehr, Editor at Trade Stocks, CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 8,000 stock market investors and manages Stock Card's successful flagship portfolio, Roll with Our CEO, on Stock Card Portfolio Store. Hoda is an Economist with an MBA from Concordia, John Molson School of Business. She applies behavioral economics, data journalism and storytelling to all aspects of her work. Subscribe for free here: Stockcard.io