Valuentum Exclusive Analysis for the Discerning Investor

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Aug 17, 2023

3 High Dividend Yielders for Consideration
Image: Entities with large net cash positions and substantial free cash flow generation have outperformed not only the broader stock market, but also key high yield areas, including REITs, mortgage REITs and master limited partnerships during the past 10 years. Source: The respective ETF sponsors. The skills to successfully invest for long-term capital gains or long-term dividend growth are much different than those required for generating high yield dividend income. Income investing is a much different proposition. However, the skills do center on a similar equity evaluation process, but one that requires an acknowledgement and heightened awareness of considerably greater downside risks. Income investing, or high yield dividend income investing, should at times be considered among the riskiest forms of investing, as many high dividend-yielding securities tend to trade closer to the characteristics of junk-rated bonds than they do most net cash rich and free cash flow generating powerhouses that we like so much in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio.

Aug 2, 2023

ICYMI: Let’s Play Devil’s Advocate: What’s the Bear Case for Realty Income?
Image Source: Realty Income. It’s helpful to challenge one’s thesis on a favorite idea every now and then, and we’ve done just that with Realty Income in this article. We see three areas of weakness at Realty Income that could challenge our bullish take on the name: 1) its retail exposure, 2) its financial leverage and arguably unwarranted investment-grade credit rating, and 3) the current rising interest rate environment. Perhaps the most compelling component of the bear case on Realty Income is its massive net debt position and present value of future dividend liabilities that dwarf its annual operating cash flow. The REIT business model isn’t as attractive as many make it out to be.

Jul 24, 2023

Public Storage Picks Up Simply Self Storage; M&A Remains Hot in Self Storage
Image Source: Public Storage. On July 24, Public Storage announced that it had agreed to acquire Simply Self Storage from Blackstone Real Estate Income Trust (BREIT) for $2.2 billion. The news follows the Public Storage-Life Storage takeout saga that ended with Life Storage running to Extra Space Storage for a deal. A PSA-LSI deal had made a lot of sense, and we’re not sure why LSI wanted nothing to do with PSA, but it may have had to do with a poor cultural fit. LSI apparently said it wasn’t for sale right before it tied the knot with EXR--moves that just didn’t seem to add up, in our view. In any case, we’re glad PSA walked away from a possible “winner’s curse” had it pursued LSI, and we’re largely indifferent to the smaller transaction regarding Simply Self Storage.

Jun 1, 2023

ICYMI: The Impact Rising Interest Rates Have on Equity REITs
Image: REITs have not performed as well as one might have thought. The Vanguard REIT ETF has underperformed the broader market considerably since 2015, while dividends per share have not grown much, if at all, since 2005. Source: Vanguard. The question on most everyone's minds: How will equity real estate investment trusts (REITs) fare in the current rising interest-rate environment? The topic has long been debated and studied, and there are myriad opinions on the subject. From where we stand, however, there are a two main moving parts consisting of fundamental and investment dynamics that investors should be aware of. Let's have a look.

Apr 21, 2023

Extra Space Storage Pursues the Winner’s Curse; LSI Shareholders Should Take the Money and Run
Image Source: Extra Space Storage. It would seem that Life Storage wants nothing to do with Public Storage, first refusing to negotiate with Public Storage regarding its proposal to merge, then rolling out a revised severance package for its CEO, CFO and COO on March 17, and now most recently announcing that it would tie the knot with Extra Space Storage on April 3.

Apr 7, 2023

Dividend Increases/Decreases for the Week of April 7
Let's take a look at firms raising/lowering their dividends this week.

Feb 7, 2023

Two Top Income Ideas Locked in Hostile Takeover Battle
Image Source: Public Storage. On February 5, Public Storage announced it has launched a hostile takeover of Life Storage. Life Storage seems content in refusing to negotiate with Public Storage at this time, but the saga is not over yet. We’re anxiously awaiting either PSA’s or LSI’s next move. We think a combined entity will have higher levels of profitability, a better credit rating, and greater financial capacity to drive even further growth in adjusted funds from operations and dividends per share. Both entities yield ~3.9% on a forward estimated basis.

Jan 20, 2023

Why Are the Dividends of REITs So Risky?
REITs, as measured by the Vanguard ETF (VNQ), have generated a total return of 39.5% since the beginning of 2015 through the end of 2022, an eight-year period that has translated into a measly compound annual return of just 4.25%. This compares to a total return of the Vanguard S&P 500 ETF (VOO) of 116.3%, which translates into a compound annual return of 10.1% over the same time period. Not only have REITs underperformed terribly during the past 8 years, but there have been more than 100 dividend cuts by REITs over this time period, too. REITs just aren’t what some make them out to be. Be careful.

Jan 6, 2023

Dividend Increases/Decreases for the Week of January 6
Let's take a look at firms raising/lowering their dividends this week.

Dec 12, 2022

CubeSmart Raises Dividend 14% But We’re Monitoring High Net Debt Load and Deteriorating Occupancy Rates
Image Source: CubeSmart. CubeSmart announced a 14% increase in its dividend payout December 7. The REIT upped its guidance for earnings per share and adjusted FFO when it reported its third-quarter results last October but deteriorating occupancy rates and the impact of rising interest rates on the firm’s massive net debt position have us on alert. We continue to monitor these dynamics closely in light of the REIT’s weak share-price performance during 2022.