Diversified REITs invest in an effective mix of property types, including residential, commercial, industrial, and sometimes even specialized properties like hotels or healthcare facilities, and collect rent from tenants. By maintaining a versatile portfolio, unlike specified REITs, they aim to enhance returns and strengthen growth prospects for investors.
Therefore, fundamentally sound diversified REITs Lamar Advertising Company (LAMR), Daito Trust Construction Co., Ltd. (DIFTY), and Ladder Capital Corp (LADR) could be ideal portfolio additions for diversification and steady income generation.
Diversified REITs own and manage a mix of property types and collect rent from tenants, making them attractive for investors seeking to gain exposure to a variety of real estate asset types. Their historically competitive total returns and comparatively low correlation with other assets make them an ideal addition and diversifier for several Americans’ portfolios.
As per Statista, as of November 2023, the ten leading diversified REITs in the U.S. totaled a combined market capitalization of around $22.16 billion. The largest diversified REIT, W. P. Carey Inc., exhibited a market capitalization of $11.48 billion in November 2023.
Moreover, this year, the future of REITs appears highly promising amid several bullish tailwinds, low asset prices, and the anticipated Fed’s interest rate tightening appear as a wonderful asset class for income seekers and those looking for a solid total return.
Notably, REITs’ historically high and reliable dividend payouts have increased over time, making them appealing to investors. REITs generally earn reliable income from long and stable tenant leases and must distribute at least 90% of their taxable income to shareholders as dividends, ensuring a stable income stream.
In light of these encouraging trends, let’s look at the fundamentals of the three best REITs - Diversified, beginning with number 3.
Stock #3: Lamar Advertising Company (LAMR)
LAMR operates as an outdoor advertising company in the U.S. and Canada. It owns and operates billboards, logo signs, and transit advertising displays, along with rents space for advertising on billboards, buses, shelters, benches, logo plates, and airport terminals.
On May 17, LAMR’s Board of Directors declared a quarterly cash dividend of $1.30 per share payable on June 28, 2024, to stockholders of record of its Class A common stock and Class B common stock on June 17, 2024.
LAMR pays an annual dividend of $5.20, which translates to a yield of 4.53% at the current share price. Its four-year average dividend yield is 4.28%. Also, the company’s dividend payouts have increased at a CAGR of 26.8% over the past three years.
LAMR’s trailing-12-month EBIT margin and gross profit margin of 31.73% and 67.11% are 49.1% and 1.1% higher than the respective industry averages of 21.29% and 66.41%. Also, the stock’s trailing-12-month net income margin of 23.26% is significantly higher than the industry average of 8.65%.
LAMR’s revenue and EBITDA have grown at respective CAGRs of 11.8% and 14.7% over the past three years. The company’s EBIT has increased 19.7% over the same timeframe, while its net income and EPS have improved at CAGRs of 27.6% and 26.8%, respectively.
During the first quarter, which ended March 31, 2024, LAMR’s net revenues increased by 5.7% year-over-year to $498.15 million. Its operating income grew 4.9% from the year-ago value to $124.60 million. Its adjusted funds from operations (FFO) were $158.24 million and $1.54 per share, up 9.8% and 9.2% from the prior year’s quarter.
In addition, the company’s adjusted EBITDA came in at $211.92 million, up 7.1% year-over-year. Its free cash flow for the quarter increased 22.4% from the year-ago value to $138.68 million.
As per the company’s revised guidance, LAMR expects net income per share for fiscal year 2024 to range between $4.95 and $5.01, and its AFFO per share is expected to be between $7.75 and $7.90.
Street expects LAMR’s revenue for the fiscal year (ending December 2024) to increase 4.7% year-over-year to $2.21 billion, and its FFO is expected to grow 10.6% year-over-year to $8.32 for the current year. Further, the company has surpassed the consensus revenue estimates in three of the trailing four quarters.
LAMR’s shares have gained 7.1% over the past six months and 20.7% over the past year to close the last trading session at $114.69.
LAMR’s solid outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Quality and Stability. Within the REITs - Diversified industry, LAMR is ranked #3 out of 45 stocks.
In addition to the POWR Ratings highlighted above, you can check LAMR’s ratings for Growth, Value, Sentiment, and Momentum here.
Stock #2: Daito Trust Construction Co., Ltd. (DIFTY)
Based in Tokyo, Japan, DIFTY designs, constructs, and rents apartments and condominiums in Japan. The company operates in three segments: Construction; Real Estate; and Finance. It designs and constructs rental housing and other structure construction, ironwork and construction, building management and renovation, and whole building leasing.
In terms of trailing-12-month EV/EBITDA, DIFTY is trading at 7.12x, 57.5% lower than the industry average of 16.77x. Further, the stock’s trailing-12-month Price/Sales multiple of 0.61 is 86% lower than the industry average of 4.40. Similarly, its trailing-12-month EV/EBIT of 8.34x is 74.7% lower than the industry average of 32.9x.
DIFTY’s revenue and EBITDA have grown at respective CAGRs of 5.2% and 6.2% over the past three years. The company’s EBIT has increased 6.6% over the same timeframe, and its net income and EPS have improved at CAGRs of 6.2% and 6.9%, respectively.
For the fiscal year that ended March 31, 2024, DIFTY’s net sales increased 4.5% year-over-year to ¥1.73 trillion ($10.97 billion). Its operating income grew 4.8% from the previous year to ¥104.80 billion ($663.87 million). The company’s ordinary income was ¥108.70 billion ($688.58 million), up 4.6% year-over-year.
Furthermore, DIFTY’s net income attributable to owners of parent of ¥74.60 billion ($472.56 million) indicates growth of 6.1% from the prior year.
Analysts expect DIFTY’s revenue for the third quarter (ending December 2024) to increase 1.3% year-over-year to $2.97 billion. Further, for the fiscal year (ending March 2025), the company’s revenue is expected to grow 252.9% year-over-year to $11.67 billion.
Over the past year, the stock has surged 3.9% to close the last trading session at $25.71.
DIFTY’s strong prospects are reflected in its POWR Ratings. The stock has an overall grade of B, translating to a Buy in our proprietary rating system.
DIFTY has an A grade for Stability and a B for Quality and Value. The stock is ranked #2 among 46 stocks within the REITs - Diversified industry.
To see the other ratings of DIFTY for Growth, Sentiment, and Momentum, click here.
Stock #1: Ladder Capital Corp (LADR)
LADR is an internally managed real estate investment trust. The REIT operates in three segments: Loans; Securities; and Real Estate. It originates conduit-first mortgage loans and invests in note purchase financings and commercial mortgage-backed securities. It also owns and invests in a portfolio of commercial and residential real estate properties
On June 14, LADR’s Board of Directors declared a second-quarter 2024 dividend of $0.23 per share of Class A common stock. The cash dividend is payable on July 15, 2024, to stockholders of record as of the close of business on June 28, 2024.
LADR pays an annual dividend of $0.92, which translates to a yield of 8.27% at the current share price. Its four-year average dividend yield is 8.68%. Moreover, the company’s dividend payouts have increased at a CAGR of 4.8% over the past three years.
In terms of forward non-GAAP P/E, LADR is trading at 8.65x, 16.4% lower than the industry average of 10.35x. Also, the stock’s trailing-12-month Price/Book of 0.93x is 14.2% lower than the industry average of 1.09x.
For the first quarter that ended on March 31, 2024, LADR reported net interest income of $37.14 million. The company’s distributable earnings and distributable EPS came in at $42.28 million and $0.33, up 5.7% and 3.1% from the previous quarter, respectively.
In addition, the company’s cash and cash equivalents stood at $1.22 billion as of March 31, 2024, versus $1.01 billion as of December 31, 2023.
Street expects LADR’s revenue and EPS for the fourth quarter (ending December 2024) to increase 27.2% and 7.5% year-over-year to $76.96 million and $0.34, respectively. Furthermore, the company surpassed the consensus EPS estimates in each of the trailing four quarters.
LADR’s stock has gained 4.9% over the past year to close the last trading session at $11.13.
LADR’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Quality. Within the same industry, LADR has topped among the 46 stocks.
Click here to access additional ratings of LADR (Growth, Momentum, Value, Stability, and Sentiment).
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LAMR shares were trading at $114.69 per share on Wednesday morning, up $0.34 (+0.30%). Year-to-date, LAMR has gained 10.37%, versus a 15.75% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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