Keep Manhattan, Just Give Me That Countryside

Recently, I added LAND to the Intelligent REIT Lab, and the Monthly Dividend Portfolio. A few days ago, I was in Washington, DC, and I meet up with Gladstone’s CEO, David Gladstone. I decided to provide readers with this interview, in which I included several questions from readers and followers.

Summary

  • There’s an interesting paradigm of Green Acres in the REIT world.
  • Many of the New York-focused REITs are living the glamour life.
  • I don’t know about you, but I like farm living, especially when it comes to dividend investing.

As a kid, I used to always enjoy watching Green Acres starring Eddie Albert and Eva Gabor. The couple (known as Oliver and Lisa Douglas) were both depicted as fish out of water. Oliver instigated the move from Manhattan to Hooterville, and Lisa played the role of the domestic diva who grew up pampered.

Lisa had to learn how to give up the glamour life and to live a more rustic life on the farm. Some of you may remember the lyrics:

Green acres is the place to be
Farm living is the life for me
Land spreading out,
so far and wide
Keep Manhattan,
Just give me that countryside

There’s an interesting paradigm of Green Acres in the REIT world.

Many of the New York-focused REITs are living the glamour life with shares trading as high as the Empire State Building. Here’s a snapshot of the dividend yields for a few of the luxury NYC REITs:

I don’t know about you, but I like farm living, especially when it comes to dividend investing. I like planting seeds in the best REITs and waiting for the crops to grow - that eventually provides me with a nice harvest of profits.

It’s just hard to build a position in a REIT - or any stock as far as that’s concerned - that does not provide ample capacity for growth. I’m just not willing to "bet the farm" on a stock that doesn’t generate adequate earnings AND dividend growth. When I see flat line growth, I am reminded that the company is simply not generating sound profit margins, and shares are likely to suffer.

As many of you know, I was once a fan of Farmland Partners (NYSE:FPI), but I have become less enthusiastic about this REIT since the merger with American Farmland. As I explained back in July:

“FPI is not covering its dividend. This suggests that the company deserves a higher risk rating as the dividend payout ratio is at 147% and the company is subjected to a cash flow shortfall of around $6 million annualized.”

I added:

“I am trained to be a pessimist, not an optimist... I must maintain cautious skepticism until I see a few more quarters of performance. I don't care how cheap the stock is today - if the company is not covering the dividend, it's higher risk.”

Alternatively, I have warmed up to FPI’s competitor, Gladstone Land(NASDAQ:LAND). Back on July 24th, I initiated a BUY recommendation, and since that time, shares have soared by over 16%.

As I explained in a recent article:

“Q2-17 marked the seventh consecutive quarter in which LAND’s dividend has been fully covered with AFFO. And with the addition of the recent acquisitions, the company expects to see even stronger earnings in the future. LAND raised its dividend again to $0.0435 per share per month and over the past 28 months, the company raised the dividend 6 times resulting in an overall increase of 45% (in the monthly distribution rate).”

Gladstone Land Is The Place To Be, Divided Growth Is The Life For Me

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