Real estate investment trusts have declined this year with the growing expectation that the Federal Reserve will raise interest rates, putting pressure on dividend-paying stocks.
But a rate hike is no reason to shun REITs entirely, according to Zack’s Investment Research, which has identified four picks that may hold their value as they’ve done in the past even as rising rates help to lift the dollar’s value. A rising dollar makes U.S. goods more expensive abroad and makes profits earned in foreign countries look smaller.
“A surging dollar may force the Fed to hike rates at an extremely slow pace,”
according to a Zack’s report on the SeekingAlpha blog. “Though counterintuitive at first, picking real estate investment trusts (REITs) may continue to be a good idea in such an environment.”
The Standard & Poor’s U.S. REIT Index is down 5.5 percent this year through Nov. 9, and has yet to reach the 10-year peak of 2007, while the S&P 500 Stock Index is up about 1 percent this year. After the October jobs report beat expectations last week, investors and economists forecast that the Fed will raise interest rates in December for the first time since 2006.
As for its REIT picks, Zack’s says, “We narrowed down our choices with the help of our new style score system.”
Zack’s REIT Picks
CBL & Associates Properties Inc. (CBL): “The forward price-to-earnings ratio for the current financial year is 6.32, compared to the industry average of 16.96. The stock has a PEG ratio of 2.16 compared to the industry average of 2.65. It has a price-to-sales ratio of 2.31, lower than the industry average of 7.64.”
Rouse Properties Inc. (RSE): “The company has a P/E of 10.45, compared to the industry average of 16.96. The stock has a PEG ratio of 1.46, compared to the industry average of 2.65. It has a P/S ratio of 3.53, lower than the industry average of 7.64.”
Preferred Apartment Communities Inc.: (APTS): “It has a P/E (F1) of 9.77, compared to the industry average of 17.69. The stock has a PEG ratio of 1.40, compared to the industry average of 2.66. It has a P/S ratio of 2.64, lower than the industry average of 6.03.”
City Office Reit Inc. (CIO): “The company has a forward price to earnings ratio of 9.76, compared to the industry average of 13.36. The stock has a PEG ratio of 0.98 compared to the industry average of 2.39. It has a P/S ratio of 3.31, lower than the industry average of 5.77.”
© 2024 Newsmax Finance. All rights reserved.