Saturday, April 21, 2012

Update on manufactured home REITs, and our index leaves the S&P in the dust!

On Sunday, I wrote about trailer parks, also known as manufactured homes in planned communities.

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 U.S.; all ages 
·       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!   

REIT
Sector
Blog date
 Price
 Closing price 04/20/12
Return to date %
Dividend yield %
PSA
Self storage
      90.75
                                           139.72
53.96
2.83







VTR
Health care
      52.87
                                             56.83
7.49
4.13
HCP
Health care

       36.81
                                                39.60
7.58
4.90
HCN
Health care

      47.53
                                             54.72
15.13
5.27
SNH
Health care

      22.00
                                              21.64
-1.64
6.98







IAECREIN:CN
Canada
 19.45cn
24.05cn
23.64
0
ZRE:CN
Canada

 16.29cn
 19.59cn
20.26
5.13
INVRLPRA:CN
Canada

 5.45cn
 5.48 cn
0.59
1.96

NNN 
Retail
27.18
27.28
0.37
 5.63







Index return
since inception*




22.17

Avg 12-mo
return of REITs in portfolio*




10.20

Avg dividend yield of REITs in portfolio





4.09
12-mo return S&P 500




3.08


Source: Bloomberg
*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!

George

P.S. I’m on Twitter. Follow me at http://twitter.com/efinancialwrite for frequent updates, personal insights and observations on how to have a healthy retirement.
If you don’t have a Twitter account, sign up today at http://www.twitter.com/signup and then click on the ‘Follow’ button from http://twitter.com/efinancialwrite to receive updates on either your cell phone or Twitter page.

2 comments:

  1. After going over a handful of the blog posts on your site, I honestly appreciate your way of blogging.

    I added it to my bookmark webpage list and will be checking back in the
    near future. Please check out my web site as well
    and tell me how you feel.
    Feel free to visit my blog post - Tulsa Auto Detailing

    ReplyDelete
  2. I took a look at your blog. And I like it. If I was in the Tulsa area, I'd sure give you a call. You might think about a posting titled "3 Vital Tips When Chosing an Auto Detail." Then expand on that part which is in your YouTube presentation.

    Good luck!

    George

    ReplyDelete