3 High-Yield REITs to Buy in September

After five straight days of declines, today’s stock market performance suggests a revival of positive investor sentiment. However, concerns over the pace of economic recovery due to the resurgence of COVID-19 cases may not abate anytime soon. This, along with rising inflation, could lead to a more extensive stock market correction in the near term.

Given this backdrop, betting on high dividend-yielding stocks could be a safer option. Since real estate investment trusts (REITs) are known for paying high dividends, we think it could be wise to pick a few stocks from this industry because REITs typically benefit from a low-interest-rate environment.

High dividend-yielding REITs Saul Centers, Inc. (BFS), Granite Point Mortgage Trust Inc. (GPMT), and CatchMark Timber Trust, Inc. (CTT) possess solid fundamentals. So, it could be wise to bet on these stocks now.

Saul Centers, Inc. (BFS)

BFS is a self-managed REIT. It manages a real estate portfolio of 61 enterprises that span shopping centers, leasable areas, and land development properties.

BFS’s $2.20 annual dividend  yields 5.04% on the current share price. In addition, the company has a record of eight consecutive years of dividend growth.

In the second quarter, ended June 30, BFS’s total revenue increased 12.7% year-over-year to $60 million. Its net income rose 57.9% from the same period last year to $16.12 million. Its FFO per share increased 23.4% from the prior-year quarter to $0.79.

The  $0.75 consensus FFO estimate  for the current quarter (ending September 2021) indicates a 4.2% year-over-year increase. Likewise, the $60.52 million consensus revenue estimate for the current  quarter reflects a 6.6% rise from the prior-year quarter. Moreover, BFS has an impressive earnings surprise history; it has topped consensus FFO estimates in three out of four trailing quarters. The stock has gained 73.9% in price over the past year and 37.9% year-to-date.

BFS’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

BFS has a B Stability and Sentiment grade. It is ranked #1 of 36 stocks in the REITs – Retail industry. Click here to see the additional POWR Ratings for BFS (Growth, Value, Momentum, and Quality).

Granite Point Mortgage Trust Inc. (GPMT)

GPMT is a commercial mortgage company for senior floating loans, with operations that include originating, managing, and investing in those loans. The company has constructed its portfolio on a diversified loan-to-loan basis.

In May, GPMT closed an $824 million commercial real estate collateralized loan obligation (CRE CLO) worth. Regarding the transaction, Jack Taylor, Granite Point’s President, Chief Executive Officer and Director, said, "This transaction validates Granite Point’s status as a well-established repeat issuer in the CRE CLO market while optimizing the financing of our loan portfolio and releasing additional liquidity to support growth in new loan originations. This CLO transaction lowers our cost of funds and, combined with our recent term financing facility, increases our percentage of non-mark-to-market loan-level financing to approximately 70%."

The company’s $0.90 annual dividend  yields 6.84% on the current share price. For the second fiscal quarter, ended June 30, the company’s comprehensive income increased 629% to $14.24 million. Its earnings per weighted average common share came in at $0.24, up substantially from its negative year-ago value.

Analysts expect GPMT’s FFO to increase 2.6% year-over-year to $1.20 for the current year (fiscal 2021). A $98.08 million consensus revenue estimate for the next year (fiscal 2022) indicates a 1.7% year-over-year rise. In addition, GPMT has topped consensus FFO estimates in three out of four trailing quarters. GPMT’s stock has gained 113.1% in price over the past year to close Friday’s trading session at $13.15.

It is no surprise that GPMT has an overall B rating, which translates to Buy in our POWR Ratings system. In addition, GPMT has a B grade for Value and Quality. In the 29-stock REITs – Mortgage industry, it is ranked #1.

To see additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for GPMT, click here.

CatchMark Timber Trust, Inc. (CTT)

CTT is a real estate investment trust. The company is the owner of interests in vast timberland areas across several states in the U.S.

On September 1, CTT announced that its joint-venture-acquired timberland enterprise Demark Timber Treasury, L.P. had sold vast acres of Prime East Texas timberlands to a client of Hancock Natural Resource Group, Inc., for $497 million in cash. This cash inflow is expected to be beneficial for the trust.

Last month, CTT completed the sale of prime Oregon timberlands for $100 million in cash to Roseburg Resources Co. This sale should improve CTT’s liquidity position.

CTT’s $0.54 annual dividend  yields 4.69% on the current price. On August 5, the company announced a $0.135 quarterly dividend payable on September 15. CTT’s dividend payouts have increased at a 0.8% CAGR over the past five years.

CTT’s total revenue increased 46.8% year-over-year to $31.94 million in the second fiscal quarter, ended June 30. Its adjusted EBITDA rose 86.3% from the prior-year quarter to $17.58 million. The company’s net income and income per common share was  $1.75 million and $0.04, respectively, indicating a significant improvement from the negative year-ago values.

The Street’s $0.64 FFO estimate  for the current year (fiscal 2021) indicates an 8.1% year-over-year increase. Likewise, the Street’s $107.08 million revenue estimate for the current year reflects a 2.7% year-over-year rise. CTT has beat consensus FFO estimates in all four trailing quarters.

The stock has gained 27.3% in price over the past year to close Friday’s trading session at $11.51.

CTT is rated a B by the POWR Ratings, which equates to a Buy. The stock has a an A Growth grade, and a B Sentiment grade. It is ranked #4 of 51 stocks in the REITs – Diversified industry.

In addition to the POWR Rating grades we’ve stated above, one can see CTT ratings for Value, Momentum, Stability, and Quality here.

BFS shares were trading at $44.46 per share on Monday afternoon, up $0.78 (+1.79%). Year-to-date, BFS has gained 46.34%, versus a 19.67% rise in the benchmark S&P 500 index during the same period.

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.

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