The Motley Fool

Can these 3 real estate investment trusts build your investment returns?

Property is a cyclical business, sometimes booming and other times it can be flat for years. As an investor you should seek a good mix of stable dividend income that real estate investment trusts can offer.

When residential or commercial property markets weaken, you have that to fall back on. As they begin to come back, the market takes notice and share prices can rise in a short time.

We’re seeing that now as the residential property market is growing. In time, commercial properties will rise as well, but the two different groups don’t have the same cycle.

GPT Group (ASX: GPT) has retail, office, logistics and business park properties in its portfolio. Its dividend yield is 5.6%. Since 2010, annual dividends per share have risen due to higher revenues.

In addition, it has been buying back shares since 2011 and continues now. This will improve dividends per share proportionately. Returns on equity and investment are 8.3% and have been improving in the last three years.

In May 2013, its share price hit a $4.23 peak and it recovered from a $3.38 low in December. It’s $3.69 now and its PE is 12.1.

Property investor and developer Mirvac Group (ASX: MGR) has a dividend yield of 5.2% and over the past three years underlying net profit has been rising. In FY2013, it achieved about 1,800 residential lot settlements, ahead of its target.

In the first half of FY2014, 1,032 lots settled and its FY2014 target has been raised to more than 2,300 lots. The company achieved a record $1.5 billion in pre-sales. The rising housing market is lifting housing construction.

Since mid-2012, its share price has climbed from about $1.25 to $1.71 currently. Its PE is 14.

Charter Hall Group (ASX: CHC) manages investments as well as doing property development. It has a variety of investment funds that have a focus on a superannuation industry client base. Its dividend yield is 5.2% and over the past three years it has raised its annual dividend.

It has returns on equity and investment both at 9.7%. In the first half of FY2014 operating earnings were up 13.1% on the prior period. Property funds management rose more than property investments. Its outlook is to raise equity for investments that will achieve its target of funds under management (FUM) growing 6%-10% annually.

From July 2012, it has risen in share price from about $2.20 to $4.02 currently.

Foolish takeaway

Investing in real estate investment trusts can be a way for your portfolio returns to have a solid foundation over the long-term. Over many years property values can go up further than people realise.

5 stocks under $5

We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.

And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

*Extreme Opportunities returns as of June 5th 2020

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

Related Articles...