This 6.5% Yielder Is Ripe For A Rebound

REIT valuations have taken quite a hit lately, and it opens up new buying opportunities for cash-rich income investors. I have not bought any Real Estate Investment Trusts in 2016 at all, largely because REIT valuations became so stretched that the risk-reward-equation was not tilted into the favor of income investors in my opinion. The consolidation in net-lease REIT valuations offers an interesting entry point. This REIT has made great progress in strengthening its balance sheet and it recently snatched a credit rating upgrade, attesting to the REIT's progress in terms of improving balance sheet stability. The stock throws off a 6.5 percent dividend.

The recent consolidation in REIT valuations, however, has not only taken a toll on REITs at the lower end of the risk spectrum, but also on REITs at the higher end of the risk spectrum. VEREIT Inc. (NYSE:VER), for instance, is such a "higher-risk" REIT. Expectations over an interest rate hike and a shakeout in the REIT sector have hit VEREIT, too. Thanks to falling REIT prices in light of an expected interest rate hike in December, investors today can gobble up VEREIT's shares at less than eleven times AFFO, or a roughly 9.2 percent AFFO yield. What's more, VEREIT sells for about half the AFFO multiples of its more stable peers.

Source: Seeking Alpha

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