The definition of insanity is doing something over and over again and expecting different results.
If that’s the case, a picture of our Federal Reserve should stand beside the term “insanity” in the dictionary.
According to CME FedWatch, the markets now expect the U.S. central bank will cut interest rates yet again this year.
The probability of one cut now sits at 58.5%. The odds of two cuts of 25 basis points have risen to nearly 15%.
For investors looking to generate income, they aren’t finding much help in the bond markets. The U.S. 10-year bond is well under 2%, and further rates would reduce payouts.
Investors should consider assets like real estate investment trusts (REITs) that benefit from lower rates and can produce huge yields thanks to their favorable tax structure and stable cash flows.
The REIT I have for you today is paying an impressive 8.2% dividend yield. Try finding that type of yield anywhere else in the market…
This Week’s Top REIT Is a Small-Cap Play with Massive Upside
Plymouth Industrial REIT Inc. (NYSE: PLYM) is a Boston-based, small-cap real estate play focused on the industrial and warehouse markets. The firm operates in both major and secondary markets and has one of the best dividends in the space at nearly 8.2%.
The company has a simple yet underappreciated real estate strategy in today’s economic environment.
It buys and owns Class B industrial properties that are more than 15 years old and typically require some upgrades.
The thesis is simple: There is a limited number of industrial properties. Limited properties in solid physical condition are a hot commodity in this late-cycle economy. This trend is one reason why the firm boosts a 96.8% occupancy rate.
Supply and demand dictate that rent prices could increase in the years ahead.
Plymouth currently manages 85 properties, with 114 buildings in 11 states.
The simple thesis of REITs like Plymouth is that they generate massive amounts of cash flow, and they’re well managed by people with strong backgrounds in the space. Plymouth went public in 2017 under the leadership of Chair Jeff Witerell and Pendleton White, Jr., company president and CIO.
The company has been growing through acquisition, and it continues to put its capital to work.
The firm had just 20 industrial assets when it went public. Its assets under management have swelled since the 2017 IPO. It recently made two big announcements that will fuel an uptick in cash flow and share price appreciation. The first was the purchase of a five-building, 924,036-square-foot industrial portfolio in Atlanta and Savannah for $34.7 million. This deal comes with four major tenants who will have an average lease of seven years.
It also purchased 10 industrial buildings in December in Indianapolis. The deal added 2.1 million square feet for $62 million. The portfolio provides solid metrics like the fact that it is 95% leased to 26 tenants. Those customers include industrial giants like ABC Supply Company, PPG Industries, Penske, and Ryde.
Plymouth Industrial REIT currently trades at $18.31 per share. As it continues to expand across the country, PLYM has significant upside.
We have a one-year price target on the REIT at $22 per share. That represents a potential upside of 20% over the next year. Combine that with an 8.2% yield, and you have a market-beating asset poised to be the cornerstone of any portfolio.
Action to Take: Investing in REITs is one of the easiest ways to add income in today’s current low-rate environment. Our favorite REIT for this week is PLYM. Buying shares of PLYM below $18.50 offers potential 20% returns on top of an 8% yield.
— Garrett Baldwin