Stable REITs Worth A Look

By Chris Seabury | June 02, 2009 AAA

Over the past two years, many investors have tried to get involved in the different areas of real estate only to find that their invesments continued to drop in price. While this is no doubt discouraging, there are signals showing that a change could be taking place in areas such as Phoenix, Arizona where the median housing price went from $268,000 in June 2006 to $120,000 today. These low prices are sparking many buyers to enter the market, which is creating stability. That being said, to be successful with any kind of investing requires identifying those areas with improving year-over-year earnings.

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Improving Year-Over-Year Earnings
There are several different real estate investment trusts (REITs) that match the criteria of improving year-over-year earnings. Nationwide Health Properties (NYSE:NHP) reported improving year-over-year earnings of 47 cents in comparison to the 37 cents reported for the same time last year. Furthermore, Fitch raised its rating on the REIT to stable, citing an improving diversification of its asset bases.

Omega Healthcare Investors (NYSE:OHI) also reported improving year-over-year earnings of 41 cents, in comparison to 34 cents one year ago. This is a sign of strength, as real estate prices have been in a free fall nationwide. (For further reading, see What Are REITs?)
Solid Leasing
Alexandria Real Estate Equities
(NYSE:ARE) reported increasing year-over-year earnings of $1.89 up from the $1.21 that was reported at this time last year. The company also reported that its first-quarter leasing activity is "solid". Duke Realty (NYSE:DRE) reported improving year-over-year earnings of 71 cents compared to 57 cents for one year ago. In addition, DRE reaffirmed previous earnings guidance of $1.42 to $1.64.

Then there is Corporate Office Property (NYSE:OFC) that reported better-than-expected earnings of 67 cents versus 56 cents for the same period last year. When comparing all three REITs, they all have improving year-over-year results. Like with the above example, improving year-over-year results are a sign of stability in a time when real estate prices have been in decline. (For more, see Investing In Real Estate.)

Bottom Line
Even though the real estate news may give mixed signals, the fact of the matter is that buying REITs with strong year-over-year earnings will help you to take advantage of the weakness being seen in this area, by purchasing those who have the most stability. One way this can be done is to compare year-over-year earnings, those companies that have increasing earnings during this time are the most stable among the sector. (For more, see Add Some Real Estate To Your Portfolio.)

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