A real estate investment trust, or REIT, is a way to invest in real estate via the stock market. REITs are publicly traded companies listed on the stock exchange that operate in the real estate or mortgage market. The REITs discussed below have been performing well recently, moving higher since the start of 2016. Not only have the prices been rising, but these REITs offer attractive dividend payouts of greater than 7% as well as still having attractive price/earnings (P/E) ratios.
Chimera Investment Corp. (CIM) traded as low as $10.89 in early 2016, and since then has been trending higher. The REIT closed at $18.13 on Feb. 14, up 66% since the low. Based on the $18.13 closing price, the P/E ratio is 7.7, and the dividend yield is just over 10%. The price movement shows that the REIT can be volatile at times, though. Therefore, waiting for a pullback in the price provides an even more attractive entry point. The 200-day moving average (MA) has been providing support/resistance over the last three years and therefore can be used an entry guideline. The 200-day MA is currently near $16.25. Buying near that 200-day MA provides a P/E ratio under 7, and a dividend yield near 12%. If the uptrend continues following a pullback, the price is expected to move above back above the $19 mark.
MFA Financial Inc. (MFA) closed at $8.02 on Feb. 14, up 43% from the $5.61 low in 2016. Based on the $0.80 in yearly dividends, the current dividend yield is 10%. The P/E ratio is also 10. For this REIT, the 100-day MA has been highlighting short-term buying locations, while the 150-day MA has been signaled buying opportunities on the deeper pullbacks. For traders looking for a longer-term trade, waiting for the price to pullback toward the 150-day MA, currently near $7.60, provides a better entry point. The slightly lower entry points also mean an improved dividend yield and P/E ratio. There is resistance above at $8.50, which is a possible location to sell. Buying near $7.60, therefore, offers about $0.90 in upside (plus dividends), whereas buying near $8 only provides about $0.50 of upside. Over the long-term, the price may exceed $8.50, especially if earnings continue to improve, but that area should be treated with some caution.
Blackstone Mortgage Trust, Inc. (BXMT) is up 40% since the 2016 low of $22.13, after closing at $31.09 on Feb. 14. This REIT currently has an 11.7 P/E ratio and a nearly 8% dividend yield. On the rally higher the 150-day MA has picked out two great buying locations. That MA is currently intersecting at $29.77, indicating that could be another buying region. One issue is that the price is approaching resistance at $31.80. That's where the price peaked in 2015 and then commenced a significant decline. While the price could move above resistance, especially if earnings continue to improve, that resistance zone is a possible exit point. If able to buy near $29.77, getting out near resistance provides about $2 of upside (plus dividends) and a slightly improved P/E and dividend yield.
The Bottom Line
Technical traders are mostly focused on their charts, but fundamentals can also be used to help separate weak companies from good ones. These REITs are all providing consistent quarterly profits and offering attractive dividend yields. This by no means guarantees the price of the REIT will continue to rally, but combining fundamentals with technicals can provide some trade ideas which may have been missed otherwise. Technical analysis helps highlight entry and exit points, while the P/E and dividend yield (and other fundamental research) can help traders and investors determine if the REIT meets their investment/trade objectives. Moving averages should not be treated as exact entry levels. Wait to see if the price finds support near the MA area, only then consider it a possible entry location.
Disclosure: The author has no exposure to the REITs mentioned.