Amid prevailing macroeconomic uncertainty, REITs could be promising investment vehicles as they can offer an efficient and cost-effective means of generating steady income and capital appreciation while diversifying your portfolio. Generally, REITs that invest in various types of real estate have an advantage over REITs that focus on a specific area.
Thus, it could be wise to invest in fundamentally sound, top-rated diversified REITs CoreCivic, Inc. (CXW), Ladder Capital Corp (LADR), and Whitestone REIT (WSR) for a stable income stream.
The Labor Department reported that the Consumer Price Index (CPI) increased 0.4% last month and 3.7% year-over-year, above respective Dow Jones estimates of 0.3% and 3.6%. The data follows a stronger-than-expected producer price index reading for September. Hot inflation data reignited interest rate fears.
Further, U.S. employers turned their back on Fed officials, who were expecting job growth to cool, adding 336,000 jobs in September, almost twice the estimate of 170,000 and above the monthly average of 267,000 over the previous year. Also, hiring figures for July and August were revised upward, with employers adding 119,000 more jobs than previously recorded.
With solid recent economic data bolstering the case for another interest rate increase, enhanced economic uncertainty, and growing geopolitical instability due to the ongoing conflict between Israel and Hamas, the stock market will likely remain highly volatile in the near term. Amid macroeconomic uncertainties, REITs stand out as a promising investment choice.
By law, a REIT must pay at least 90% of its taxable income to shareholders in the form of dividends, providing investors with a passive income option. In addition to a steady income stream, it can diversify a portfolio and act as an inflation hedge through real estate appreciation.
Diversified REITs are often considered ideal investment vehicles due to low risk, as companies in this industry primarily own and operate income-producing real estate across a wide range of properties, including retail, industrial, healthcare, and residential buildings, mitigating the risk of losses if a specific sector underperforms.
With these favorable trends in mind, let’s delve into the fundamentals of the REITs - Diversified stock picks, beginning with the third choice.
Stock #3: Ladder Capital Corp (LADR)
LADR is an internally managed commercial real estate investment trust. The company originates and invests in a diverse portfolio of commercial real estate and real estate-related assets, focusing on senior secured assets. It operates through Loans; Securities; and Real Estate segments.
On September 15, LADR announced a third-quarter 2023 dividend of $0.23 per share of Class A common stock. The cash dividend was paid on October 16, 2023, to stockholders of record on September 29, 2023. The company pays an annual dividend of $0.92 per share, translating to a 9.23% yield on the current price level. Its four-year average dividend yield is 9.45%.
For the second quarter that ended June 30, 2023, LADR’s net interest income increased 79.2% year-over-year to $40.50 million. The company reported distributable earnings of $41.50 million or $0.33 per share. Its cash and cash equivalents were $777.10 million as of June 30, 2022, compared to $609.10 million as of December 31, 2022.
Street expects LADR’s EPS for the third quarter (ended September 2023) to increase 13% year-over-year to $0.31. Similarly, the consensus FFO estimate of $1.31 for the fiscal year (ending December 2023) indicates a 13.1% rise year-over-year. Moreover, the stock topped its consensus FFO estimates in all four trailing quarters, which is impressive.
Shares of LADR have gained 7.2% over the past six months to close the last trading session at $9.97.
LADR’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
LADR has a B grade for Quality and Value. It is ranked #5 of 46 stocks in the REITs - Diversified industry.
Click here to access additional LADR ratings for Growth, Momentum, Stability, and Sentiment.
Stock #2: CoreCivic, Inc. (CXW)
CXW offers a broad range of solutions to government partners, like corrections and detention management, a network of residential and non-residential alternatives, and government real estate solutions. It operates through CoreCivic Safety; CoreCivic Community; and CoreCivic Properties segment. It owns partnership correctional, detention, and residential reentry facilities.
On October 12, CXW entered an amendment and extension of the Bank Credit Facility. The New Bank Credit Facility, among other things, increased the available borrowings under the revolving credit facility from $250 million to $275 million, increased the size of the term loan from an initial balance of $100 million to $125 million, and extended the maturity date to October 11, 2028.
David M. Garfinkle, CXW’s Executive Vice President and Chief Financial Officer, said, “We are very pleased with the support from our new and existing financial partners enabling us to further extend our overall debt maturity profile, maintain a similar pricing structure, while providing us with greater financial flexibility.”
On September 25, CXW signed a new management contract with Hinds County, Mississippi, for up to 250 adult male pre-trial detainees at the company’s 2,672-bed Tallahatchie County Correctional Facility in Tutwiler, Mississippi. The initial contract term is for two years, which could be extended for an additional year upon mutual agreement.
The company continues to witness growing demand for its correctional and detention solutions, evidenced by this contract with Hinds County.
In the second quarter that ended June 30, 2023, CXW’s revenue increased 1.5% year-over-year to $463.68 million. Its income before income taxes grew 30.4% from the year-ago value to $19.01 million. The company’s Funds from Operations came in at $39.05 million or $0.34 per share, representing increases of 13.9% and 21.4% year-over-year, respectively.
Analysts expect CXW’s revenue and FFO for the third quarter (ended September 2023) to increase 2.4% and 17.2% year-over-year to $475.25 million and $0.34, respectively. For the fiscal year 2024, the company’s revenue and FFO are expected to grow 4.5% and 24.3% from the previous year to $1.97 billion and $1.72, respectively.
Over the past six months, CXW’s stock has gained 23.1% and 18.8% over the past year to close the last trading session at $11.31.
CXW’s POWR Ratings reflect its promising prospects. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
The stock has a B grade for Value and Sentiment. It is ranked #3 of 46 stocks in the REITs - Diversified industry.
In addition to the POWR Ratings I’ve just highlighted, you can see CXW’s ratings for Stability, Momentum, Growth, and Quality here.
Stock #1: Whitestone REIT (WSR)
WSR is a community-centered REIT that acquires, owns, and operates open-air retail centers in some of the nation’s fastest-growing markets, including Phoenix, Austin, Dallas-Fort Worth, Houston, and San Antonio. Its centers are merchandised with a mix of service-oriented tenants offering food, financial and logistics services, and education and entertainment to communities.
On September 6, WSR’s Board of Trustees declared a monthly cash dividend of $0.04 per share on the company’s common shares and operating partnership units for the fourth quarter of 2023. The dividend increase represents a quarterly amount of $0.12 per share and an annualized amount of $0.48 per share.
WSR’s dividend translates to a 4.87% yield annually. Its four-year average dividend yield is 6.80%.
For the second quarter that ended on June 30, 2023, WSR’s total revenues increased 4.2% year-over-year to $36.46 million. Its income before equity investment in real estate partnership and income tax was $12.62 million, up 177.6% from the prior year’s quarter. Also, net income attributable to Whitestone REIT rose 160.6% year-over-year to $11.31 million.
Furthermore, the company’s earnings per share came in at $0.22, representing an increase of 144.4% year-over-year. For the six months ended June 30, 2023, cash inflows from operating activities grew 18.6% year-over-year to $21.71 million.
Analysts expect WSR’s revenue to increase 4.3% year-over-year to $151.97 million for the fiscal year ending December 2024. The company’s FFO for the next year is expected to grow 10.9% year-over-year to $1.04. Also, the stock has surpassed its consensus revenue estimate in three of the four trailing quarters.
The stock has gained 6.6% over the past six months and 14.3% over the past year to close the last trading session at $9.86.
WSR’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
The stock has a B grade for Growth, Stability and Sentiment. It is ranked #2 within the same industry.
To see other POWR Ratings for Value, Quality, and Momentum for WSR, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
CXW shares were unchanged in premarket trading Tuesday. Year-to-date, CXW has declined -2.16%, versus a 15.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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