Three REITs are active in this market, and I’ve taken a closer at them:
· Equity LifeStyle Properties (ELS) —
Florida, Arizona, California, NE U.S.; for retirees
· Sun Communities (SUI) — Midwest
; all ages U.S.
· UMH Properties (UMH) — PA and NJ; lower income, affordable housing
All three REITs have had impressive returns over the past 12 months, in the 18% to 22% range. But their financials stink! The lousy earnings, or lack thereof, stick out like a sore thumb …
ELS reported its quarterly earnings on April 16: $0.30 vs. $0.61 last year. And they’ve been on a downward trend for the past three years, although they are starting to turn around.
SUI reported 4th quarter 2011 losses of $0.10 per share on February 23, 2012, missing the $0.06 profit expectations of the 2 analysts following the company. That follows losses of $0.02 and $0.04 the previous quarters.
The next earnings announcement from SUI is expected next week. Estimates are for $0.15. But it would take several quarters of rising earnings to impress me.
UMH isn’t much better: A $0.01 loss for the final quarter of 2011 following two quarters of zero. And 2011 earnings were $0.14 vs. $0.52 for 2010.
Another important number to watch is debt-to-equity ratio. This shows how aggressive the company is in financing growth with debt. The higher it is, the more they have to pay in carrying costs, which can be a huge drain on profits.
· ELS: 65%
· SUI: 102%
· UMH: 51%
There are many good reasons why these REITs could be successful:
· Nationwide, homebuilding is off and the surplus is dwindling.
· Unemployment is dropping.
· Retail is on the rise.
· Boomers want to downsize.
· Manufactured homes are a less-expensive alternative to traditional housing.
I think all three of these manufactured home REITs offer possibilities, so I’ll keep an eye on them. But at least until earnings improve, I’m staying away.
The e-FinancialWriter REIT portfolio for the week ending April 20, 2012, took a nice jump, up over 22% since implemented. The average 12-return for each REIT was more than 10%, not including 4% in dividends!
Closing price 04/20/12
Return to date %
Dividend yield %
return of REITs in portfolio*
Avg dividend yield of REITs in portfolio
12-mo return S&P 500
*Does not include dividends paid
If you have trouble seeing the chart, just in zoom in with your web browser.
To read the posting where I introduced a specific REIT, click the “Blog date” link. And if you’d like to see prior reports, type “reit index” in the search box.
Enjoy your weekend!
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