Weakness in the real estate investment trust (REIT) sector continues as investors dump shares.
The relentless selling this week was enough to take these three REITs to new 52-week lows. It’s not a bullish sign for the group that the trend seems to be irretrievably downward this year.
Investors might think that with yields backing away from their highs of a few weeks ago that these REITs would at least get into “relief rally” mode. But no. They also might conclude that the 30-year mortgage rate coming down from the highs of just weeks ago would spur buying in this typically interest-rate sensitive sector. No again.
Here’s the point-and-figure chart of the CBOE 10-year U.S. Treasury yield:
Take a look at how the yield is headed lower.
Here’s the point-and-figure chart for the 30-year fixed yield mortgage average in the U.S.:
The yield on this one, widely followed among mortgage analysts, hit 7 and is now lower.
Under these circumstances, the following REITs might have begun to perform more favorably.
Here is the daily price chart for Broadmark Realty Capital Inc. (NYSE: BRMK):
That is a new 52-week low, and the REIT continues to trade well below the declining 50-day moving average and the declining 200-day moving average. Broadmark trades at half its book value with a price-earnings ratio of 9.8. The company is paying a 19.31% dividend, which may be difficult to sustain under the current economic circumstances.
This is how the daily price chart looks for Douglas Emmett Inc. (NYSE: DEI)
The REIT dropped to a 52-week low at the open and rallied back but not enough to close with a gain for the day. Douglas Emmett is in the office building sector and is trading now at 1.11 times book with a price-earnings ratio of 31. The company pays a dividend of 6.89%.
Here is the daily price chart for Granite Point Mortgage Trust Inc. (NYSE: GPMT):
It gapped down at the open, established the new 52-week low and then traded higher and didn’t make it back to Nov. 16 low price. The REIT is having trouble getting above the 50-day moving average and staying there. The 200-day moving average keeps going down.
Granite Point is a mortgage real estate investment trust now trading at 0.30 book and paying a 17.67% dividend, another high-paying REIT unlikely to remain at that level.
Other REITs have reacted somewhat better to the recent slight pullback in interest rates but these three and a few others remain in decline.
REITs are one of the most misunderstood investment options, making it difficult for investors to spot incredible opportunities until it’s too late. Benzinga’s in-house real estate research team has been working hard to identify the greatest opportunities in today’s market, which you can gain access to for free by signing up for Benzinga’s Weekly REIT Report.
Not investment advice. For educational purposes only.
Charts courtesy of StockCharts
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