Hersha Hospitality Trust (HT-PD) | Daily Alert May 22
Hersha’s Preferred D (HT-PD) has tripled from its low-point, far out-pacing the common stock, and there is still tremendous upside potential. We recommend using limit orders to purchase this preferred stock because the float is relatively small.
The CARES Act provides aid for this industry under the small business provisions. The act defines each individual hotel as its own small business because hotel owners with several properties, if taken together, would not qualify as a small business.
In April, Hersha was able to restructure covenants regarding its debt which greatly enhances the company’s future. It was able to amend its bank credit facility by obtaining waivers on all financial covenants through March 31, 2021. These covenants required the company to sequester funds if certain financial ratios were not met.
Additionally, the company accessed an additional $100 million on its line of credit. To enhance liquidity, the company has also suspended all dividend payments for the balance of 2020. These events were critical to the company’s near-term survival prospects.
This preferred stock is cumulative, which means that all unpaid preferred dividends must be restored before dividends on the common stock can be resumed. The resumption and payment of unpaid dividends of $1.64 per share (annually) on the preferred D would provide close to a 15% annual yield based on today’s stock price. Of course, just the prospect of a resumption of the dividend would propel a steep recovery in the price of the preferred D stock.
The preferred dividend in 2019 amounted to 26% of the company’s FFO, which means that it will be much easier to restore the preferred stock dividends.
Gray Cardiff, Sound Advice, soundadvice-newsletter.com, 800-825-7007, April 30, 2020
*Gladstone Land Corporation (LAND)
Gladstone owns farmland and related properties in 10 states that it leases to corporate and independent farmers on a triple-net lease basis (tenants pay all expenses). Although a 2013 IPO, Gladstone is still growing revenues around 10% annually. Gladstone pays monthly dividends equating to a 3.7% yield.
Harry Domash, Dividend Detective, www.dividenddetective.com, 866-632-1593, June 5, 2020
*W. P. Carey Inc. (WPC)
W. P. Carey. It’s a unique net lease REIT that offers powerful scale advantage by investing in mission-critical office and industrial properties. Holding 1,215 properties, WPC is one of the largest owners of net-lease assets. It’s also among the top 20 REITs in the MSCI U.S. REIT Index. The company’s portfolio is well diversified through its 352 tenants, the top 10 of which represent 21.7% of its annual base rent (ABR).
It’s obvious that COVID-19 has disrupted certain property sectors. Yet WPC’s business model is rooted in:
Key distribution facilities
Critical research and development facilities
Top-performing retail stores (with limited exposure in the U.S.)
This is how it’s managed to maintain strong occupancy levels of, at last check, 98.8%. The same was true during the credit crisis and following economic downturn, in which that figure never dropped below 96.6%, which it touched on in 2010.
We maintain a Buy rating on this moat-worthy REIT that’s now trading at $64.18. It has a P/FFO multiple of 14.1x and a dividend yield of 6.5%.
Analysts estimate that FFO per share will decline by -2% in 2020 and by -1% in 2021 before advancing 4% in 2022.
Brad Thomas, Forbes Real Estate Investor, forbes.com/newsletters, firstname.lastname@example.org, June 5, 2020
Morgan Stanley (MS-PL) | Daily Alert June 11
Morgan Stanley; 4.875% Fixed Rate, Non-Cumulative Perpetual; Par $25.00; Annual Cash Dividend $1.21875: Current Indicated Yield 5.00%; Call Date 01/15/25 at $25.00; Yield to Call 5.47%; Pay Cycle 1m; Exchange NYSE; Ratings, Moody’s Ba1, S&P BB+; CUSIP 61762V804
Morgan Stanley (MS) is a fully integrated investment banking company, offering Investment and Wealth Management Services, Investment Banking & Capital Markets Operations, Lending, and Sales & Trading at both the Institutional and Retail level. The firm has one of the largest retail brokerage operations in the U.S. market.
Earnings and profitability over the last five-year period have been solid. This preferred stock issue is fixed rate and callable at par plus declared dividends on 01/25/25 or any dividend payment date thereafter.
MS reported solid 1Q 2020 earnings although net income of $1.7 billion or $1.01 per share fell short of analysts’ $1.15 estimates. Top line revenue was also a bit shy of analysts’ expectations. Management said the COVID-19 pandemic negatively affected each of the company’s major businesses. Nonetheless, MS achieved solid results in the face of economic turmoil.
Although financial results may remain under pressure over the remainder of 2020, we expect upward momentum in 2021. This preferred investment is suitable for low- to medium-risk taxable portfolios. Dividends are qualified and taxed at the 15%-20% rate.
We point out that MS’s senior debt is rated A3 by Moody’s and BBB+ by S&P. Buy up to $25.50 for a 4.78% current yield and 4.40% yield to call.
Martin Fridson, CFA, Income Securities Investor, isinewsletter.com, 800-472-2680, June 2020
*American States Water Company (AWR)
I’m going to bring back a stock that was a winner for 2 for 1 about five years ago, with a 24.6% overall annualized return when we sold it in 2016. American States Water is a regulated utility providing water to portions of California. It is also under long term contract to supply water and maintain the water infrastructure for ten military bases across the country. This is another business that is not going to go away no matter what the state of the economy. AWR is relatively profitable for a utility while having the advantages of a secure and predictable cash flow and return on investment. The dividend is a modest 1.6% but it is secure and growing at about a 6% annual rate.
Neil Macneale, 2 for 1 Stock Split Newsletter, 2-for-1.com, 408-210-6881, May 2020