The problem with REITs is that interest rates seem to be on the rise despite earlier expectations that they would be headed down again probably by early to mid-2024.
The recent action in 10-year Treasury yields — back up to 4.4% — and in the 30-fixed mortgage rate — a 20+ year high of 7.09% — is an unhappy look for interest-rate sensitive sectors such as real estate investment trusts.
Many of them dropped to new 52-week lows last week and these 5 caught my attention:
Crown Castle International is one of the really big REITs with a market capitalization of $43.28 billion. Average daily volume on the New York Stock Exchange comes to 3.09 million shares. The price-earnings ratio is 25.50 and the company is paying a dividend of 6.25%.
The daily price chart (below) shows the damage so far this year: from a February peak of $150 to the current price — and new low — of $100. Note that it trades steadily below both its 50-day moving average (the blue line) and its 200-day moving average (the red line).
Hannan Armstrong Sustainable Infrastructure Capital Trust trades with the rather steep price-earnings ratio of 38 — that’s above the Shiller p/e for the Standard and Poor’s 500 which now sits at 31. Market capitalization is $2.16 billion. This REIT pays a 7.51% dividend.
The daily price chart shows a move from a February high of just above $38 to this week’s low of $20 before a short bounce back. Hannon Armstrong trades below its 50-day and its 200-day moving average. The relative strength index (RSI, below the price chart) suggests that a positive divergence from March to the prsent.
Medical Properties Trust saw the most single-day volume of the year on Friday and most of it consisted of sell orders. The REIT trades at half its book value with a p/e of 59. The dividend of 16.74% is likely unsustainable under the current conditions. Market capitalization is $4.49 billion.
After a decent rally from the late March lows to the late July high, it’s been a relentless “get me out” type of situation during August. Medical Properties Trust trades well below both the 50-day moving average and the 200-day moving average, not a bullish pattern.
W. P. Carey & Company has a market capitalization of $13.76 billion and average daily volume of 1.07 million shares. The price-earnings ratio is 17.09. The company pays a 6.69% dividend. Earnings have been decent: up 33.50% this year and up 3.70% over the past 5 years.
The peak price of $83 in late January has given way to the August price of $63.93, a typical type of downtrend for most in the sector. It’s a bearish picture that the stock is unable to make above the 2 significant moving averages.
Xenia Hotels and Resorts is smaller than the above REITs with a market capitalization of $1.20 billion. It trades with a price-earnings ratio of 23.77 and at just 89% of book value. Average daily volume is relatively light for an NYSE stock at 807,000 shares. The dividend is 3.54%.
You can see the downtrend now in place on the daily chart below. It’s been unable all this year to gain enough strength to make above the 200-day moving average. Right now, it’s back to well below the 50-day moving average.
Should interest rates and mortgage rates have peaked, everything could change — but for now, this sector trends downward.
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