NEW YORK (TheStreet) -- With unemployment rates dropping this year and commercial real estate booming, it could be a good time to invest in commercial real estate REITs.
These kind of real estate investment trusts invest in office buildings, warehouses, retail space and other kinds of commercial spaces.
In general, investors like REITs for their strong dividend income, among other factors, as REITs are required to pay out at least 90% of their income in the form of dividends to investors each year.
In the first quarter, the FTSE NAREIT All REITs Index, a broad benchmark of the listed U.S. REIT industry including both equity and mortgage REITs, rose 4.05% for the quarter, compared to the S&P 500's return of just 0.95% for the first three months of the year.
For the month of April, the FTSE NAREIT Equity Office Index, comprised of 21 constituents, rose 0.31% for the year, outperforming the association's broader REIT index, which had fallen 1.17%, in the same time period.
TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
1. BioMed Realty Trust (BMR - Get Report)
Market Cap: $4.1 billion
Annual Dividend Yield: 4.92%
Year-to-date return: -4.8%BioMed Realty Trust, Inc. operates as a real estate investment trust (REIT) that focuses on providing real estate to the life science industry in the United States.
Market Cap: $4.1 billion
Annual Dividend Yield: 4.92%
Year-to-date return: -4.8%BioMed Realty Trust, Inc. operates as a real estate investment trust (REIT) that focuses on providing real estate to the life science industry in the United States.
TheStreet Ratings: Buy, B-TheStreet Ratings said: "We rate BIOMED REALTY TRUST INC (BMR) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team gobxp
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- Despite its growing revenue, the company underperformed as compared with the industry average of 8.5%. Since the same quarter one year prior, revenues slightly increased by 5.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- BIOMED REALTY TRUST INC's earnings per share declined by 20.0% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, BIOMED REALTY TRUST INC increased its bottom line by earning $0.98 versus $0.20 in the prior year.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, BIOMED REALTY TRUST INC's return on equity is below that of both the industry average and the S&P 500.
- In its most recent trading session, BMR has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it is one of the factors that makes this stock an attractive investment.
- You can view the full analysis from the report here: BMR Ratings Report
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BXP data by YCharts
BXP data by YCharts
2. Boston Properties Inc. (BXP - Get Report)
Market Cap: $20.2 billion
Annual Dividend Yield: 1.96%
Year-to-date return: 2.3%
Boston Properties, Inc., a real estate investment trust (REIT), together with its subsidiaries, engages in the ownership and development of office properties.
Market Cap: $20.2 billion
Annual Dividend Yield: 1.96%
Year-to-date return: 2.3%
Boston Properties, Inc., a real estate investment trust (REIT), together with its subsidiaries, engages in the ownership and development of office properties.
TheStreet Ratings: Buy, BTheStreet Ratings said: "We rate BOSTON PROPERTIES INC (BXP) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations, increase in stock price during the past year and increase in net income. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- BXP's revenue growth has slightly outpaced the industry average of 8.5%. Since the same quarter one year prior, revenues slightly increased by 9.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- 35.09% is the gross profit margin for BOSTON PROPERTIES INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 27.36% is above that of the industry average.
- Net operating cash flow has significantly increased by 62.18% to $201.45 million when compared to the same quarter last year. In addition, BOSTON PROPERTIES INC has also vastly surpassed the industry average cash flow growth rate of 0.73%.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 206.9% when compared to the same quarter one year prior, rising from $56.62 million to $173.77 million.
- You can view the full analysis from the report here: BXP Ratings Report
3. CoreSite Realty Corp. (COR - Get Report)
Market Cap: $1 billion
Annual Dividend Yield: 3.54%
Year-to-date return: 21.4%
CoreSite Realty Corporation engages in the ownership, acquisition, construction, and management of data centers.
Market Cap: $1 billion
Annual Dividend Yield: 3.54%
Year-to-date return: 21.4%
CoreSite Realty Corporation engages in the ownership, acquisition, construction, and management of data centers.
TheStreet Ratings: Buy, BTheStreet Ratings said: "We rate CORESITE REALTY CORP (COR) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- COR's revenue growth has slightly outpaced the industry average of 8.5%. Since the same quarter one year prior, revenues rose by 17.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- CORESITE REALTY CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CORESITE REALTY CORP increased its bottom line by earning $0.66 versus $0.50 in the prior year. This year, the market expects an improvement in earnings ($0.84 versus $0.66).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 38.1% when compared to the same quarter one year prior, rising from $4.82 million to $6.65 million.
- Net operating cash flow has increased to $30.75 million or 15.12% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 0.73%.
- Powered by its strong earnings growth of 61.53% and other important driving factors, this stock has surged by 51.57% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: COR Ratings Report
4. DuPont Fabros Technology Inc. (DFT - Get Report)
Market Cap: $2.1 billion
Annual Dividend Yield: 5.16%
Year-to-date return: -1.8%DuPont Fabros Technology, Inc., a real estate investment trust (REIT), engages in the ownership, acquisition, development, operation, management, and lease of large-scale data center facilities in the United States.
Market Cap: $2.1 billion
Annual Dividend Yield: 5.16%
Year-to-date return: -1.8%DuPont Fabros Technology, Inc., a real estate investment trust (REIT), engages in the ownership, acquisition, development, operation, management, and lease of large-scale data center facilities in the United States.
TheStreet Ratings: Buy, BTheStreet Ratings said: "We rate DUPONT FABROS TECHNOLOGY INC (DFT) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth, reasonable valuation levels, good cash flow from operations and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
