Amid a challenging macroeconomic environment, let’s evaluate the strong fundamentals of some fundamentally strong REITs, Gaming and Leisure Properties, Inc. (GLPI), Whitbread plc (WTBDY), and Arlington Asset Investment Corp. (AAIC), to garner substantial returns.
Real Estate Investment Trusts (REITs) are financial instruments that enable individuals to invest in real estate properties without requiring direct ownership or management responsibilities. While owning and managing various income-generating properties, these trusts generate profits through rental income and capital appreciation of their real estate holdings.
This makes REITs an attractive investment option for those looking to diversify their portfolio, earn steady income streams, and potentially benefit from the appreciation of real estate values.
Historically, REITs tend to outperform their private market counterparts across different inflation levels, interest rates, and economic growth regimes. This makes them a solid choice for investors planning to invest in real estate. Additionally, REIT dividends can offer a reliable source of income in times of inflation, as rents and property values typically rise along with prices.
Furthermore, according to a Technavio report, the global REIT market is projected to increase by $333.01 billion between 2022 and 2027. The market’s growth momentum is estimated to accelerate at a CAGR of 2.8% in the same period.
Hence, let’s dive deeper into the featured REITs.
Gaming and Leisure Properties, Inc. (GLPI)
GLPI is a REIT that acquires, finances, and owns real estate property for triple-net lease arrangements with gaming operators. The company self-administers and manages its portfolio of approximately 57 gaming and related facilities, comprising real property associated with gaming and related facilities.
On March 10, GLPI distributed its first quarter dividend of $0.72 per share on its common stock, along with a special dividend of $0.25 per share linked to the sale of the Tropicana Las Vegas building. GLPI pays a $2.88 per share dividend annually, translating to a 5.58% yield on the current price level. Its four-year average dividend yield is 6.26%.
On January 4, GLPI announced that it had completed acquiring the land and real estate assets of the Tiverton Casino & Hotel in Tiverton and Hard Rock Hotel & Casino Biloxi in Biloxi from Bally's Corporation (BALY) for $635 million in total consideration, inclusive of $15 million in the form of OP units. Such acquisitions should help the company in expanding its footprint.
GLPI’s total revenue increased 12.8% year-over-year to $336.39 million in the fourth quarter that ended December 31, 2022. The company’s net income rose 66.8% year-over-year to $199.59 million, while its income from operations grew 34.7% from the prior-year quarter to $275.46 million. Also, its adjusted EBITDA increased 12.6% from the year-ago value to $312.01 million.
In addition, GLPI’s Adjusted Funds From Operations (AFFO) rose 16.5% from the year-ago value to $239.14 million, while AFFO per share came in at $0.97, up 4.7% year-over-year.
Analysts expect GLPI’s revenue and EPS for the first quarter that ended on March 31, 2023, to increase 10.4% and 26.9% year-over-year to $347.56 million and $0.90, respectively. It surpassed the revenue estimates in each of the trailing four quarters, which is excellent. Also, GLPI’s revenue, EBITDA, and net income grew at CAGRs of 4.38%, 7.71%, and 20.54% over the past three years, respectively.
Over the past six months, GLPI has gained 16.9% to close the last trading session at $51.59.
GLPI’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Growth, Stability, Sentiment, and Quality. In the 47-stock industry REITs - Diversified industry, it is ranked #5. To see additional POWR Ratings of GLPI for Value and Momentum, click here.
Whitbread plc (WTBDY)
Headquartered in Dunstable, the United Kingdom, WTBDY owns and operates approximately 841 hotels with 82,286 rooms in the United Kingdom; 10 hotels in the Middle East; and 35 hotels with 5,875 rooms in Germany under the Premier Inn, ZIP by Premier Inn, and hub by Premier Inn brands. The company also operates 439 restaurants under different brands.
On March 9, WTBDY added eleven new and extended hotels to its UK network during its financial year 2023. With this expansion, the company has added more than 1,500 new Premier Inn and hub by Premier Inn bedrooms to its growing network of affordable hotels across the UK and Ireland. Such new additions are expected to bolster WTBDY’s overall revenues while expanding its footprint.
The company paid a dividend per share of 24.40p per share to its shareholders in the first half of the fiscal year 2023. WTBDY’s four-year average dividend yield is 1.27%, while its annual dividend translates to a 1.51% yield on the prevailing prices.
According to Alex Flach, the UK Development Director for WTBDY, the company's recent hotel openings reflect its active approach and recognition of the greater market potential for Premier Inn and Hub by Premier Inn rooms in the United Kingdom and Ireland.
WTBDY’s statutory revenue increased 104.1% year-over-year for the six-month period that ended on September 1, 2022, to £1.35 billion ($1.68 billion). Its adjusted EBITDAR rose 187% from the year-ago value to £511.70 million ($636.15 million).
The company’s operating profit and attributable profit for the period increased significantly year-over-year to £343.20 million ($426.67 million) and £216.40 million ($269.03 million), respectively. Also, its adjusted EPS stood at 107p versus a loss per share of 26.4p in the prior-year period.
The stock’s revenue and EBITDA grew at CAGRs of 3.7% and 3.7% over the past three years. Likewise, its total assets grew at a CAGR of 7.8% during the same period.
Analysts expect WTBDY’s revenue for the fiscal years ending 2023 and 2024 to increase 49.9% and 5.6% year-over-year to $3.18 billion and $3.36 billion, respectively.
WTBDY’s shares have gained 37.7% over the past six months to close the last trading session at $9.86.
It’s no surprise that WTBDY has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Growth and a B for Momentum and Stability. Out of 17 stocks in the REITs – Hotel, it is ranked first.
In addition to POWR Ratings we stated above, we also have WTBDY’s ratings for Value, Sentiment, and Quality. Get all WTBDY ratings here.
Arlington Asset Investment Corp. (AAIC)
AAIC primarily invests in mortgage-related and residential real estate and has elected to be taxed as a REIT. Its investment capital is allocated between agency mortgage-backed securities, mortgage servicing right related assets, credit investments, and single-family residential properties.
On March 30, the company paid a quarterly dividend of $0.4375 per share of its 7% Series B Cumulative Perpetual Redeemable Preferred Stock and a quarterly dividend of $0.515625 per share of its 8.25% Series C Fixed-to-Floating Cumulative Redeemable Preferred Stock for the first quarter of 2023.
During the fourth quarter that ended December 31, 2022, AAIC’s total interest and other income increased 18.9% from the last quarter (ended September 30, 2022) to $14.73 million. Its net operating income rose 5.3% quarter-over-quarter to $7 million, while its net income grew 27.9% from the prior quarter to $4.39 million. Also, its EPS stood at $0.13, up 30% quarter-over-quarter.
Street expects AAIC’s revenue and EPS for the first quarter (ended March 31, 2023) to increase 89.5% and 40% year-over-year to $7.89 million and $0.07, respectively. Moreover, it surpassed the EPS estimates in three of the trailing four quarters, which is promising. Also, AAIC’s revenue grew at a 2% CAGR over the past three years.
Over the past five days, the stock has gained marginally to close the last trading session at $2.63
AAIC’s solid prospects are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has an A grade for Sentiment and a B for Growth and Value. Among the 27 stocks in the REITs – Mortgage industry, it is ranked first. Click here to see the other ratings of AAIC for Momentum, Stability, and Quality.
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GLPI shares were trading at $51.94 per share on Thursday afternoon, up $0.35 (+0.68%). Year-to-date, GLPI has gained 1.52%, versus a 8.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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