Is This 11%-Yielding Real Estate Stock a Buy?
Net-lease real estate investment trusts (REITs) are generally geared towards steady growth and income, but what about Global net lease (NYSE: GNL) and its 11% dividend yield? In this Fool Live video clip, recorded on December 9th, Fool.com contributors Marc Rapport, Jason Hall and Matt Frankel take a closer look at Global Net Lease and what investors should know before adding it to their portfolio.
Marc report: Right now I’ve been thinking a lot about Global Net Lease, GNL. This is also a REIT – a real estate fund. They are small, they do not belong to the big ones. But they’re down 20% since I bought them over the summer. I think they are in a better position than it looks. They’re a mix of office and industrial, they’re the good, the bad, and the ugly about the pandemic.
It’s an office, industry, retail. Your industry seems to be doing pretty well. Of course the office has struggled and the retail has struggled, most of the time they’re over 50% industrial and that’s going well. They have 312 properties, around 60% in the US, the rest mostly in the UK Walmart in Britain your yield, I am probably guilty of chasing the yield. But I’m in the tender phase of my life where income is just as important as growth. I want to support the income part of my portfolio. They don’t make up to this day, almost 11%, which seems dangerously high to me. Its payout ratio is currently over 100%. But no, it fell. I’m sorry, I’m looking here now. In the third quarter it only fell to 91%. That’s not bad. Your FFO [funds from operations] per share has grown. I think they look promising, and on the stock price itself, they have rebounded. They fell to about $ 13.50 on the first of the month. You’re back over $ 15.
Matt Frankel: Their payout percentage is a bit high for convenience. But I’ll say that industrial property is an extremely hot type of property right now. There are many key markets in which industry is practically 100% occupied. There is not enough supply to meet demand. There are tenants on waiting lists to get more space. E-commerce exploded last year with COVID. I saw that they also announced a Walmart learning center. Walmart is becoming more and more of a big tenant of theirs. But Industrial is just a great game right now, and that’s one way of making some profit from it. Like I said, the payout percentage is a little high for convenience, but not a red flag in and of itself.
Marc report: Yeah, I would just ask what their ticker is. It’s GNL, Global Net Lease, that really targets exactly what they’re doing.
Jason Hall: I just want to show that very quickly because I think it really underlines the essence here, and that’s the trend. A look at the cash payout ratio, because with REITs, the regular payout ratio based on their GAAP earnings can be misleading. With a cash dividend payout ratio, the most important thing here is: it’s moving in the right direction. I think that’s the most important thing I really wanted to emphasize.
Marc report: Thanks for the hint. I appreciate it. Your tenant list, your top 10 tenants are big names: FedEx; your largest office tenant is [Dutch multinational bank] ING.
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