The market’s a rough place right now. Investors are nervous and the economic outlook is questionable. But there’s one type of stock that remains popular even in a slowdown. I’m talking about stocks that pay dividends.
Small cap stocks and dividends are not mutually exclusive. There are some small companies that pay healthy dividends.
Industry REIT – Diversified
Recent Price $3.48
Market Cap $144.8 m
Shares Outstanding 38.4 m
Average Volume 367,380
Dividend Yield 6.1%
RAIT Financial Trust (RAS) is a vertically integrated REIT with two business lines. The company participates in both commercial real estate lending and direct ownership.
Their commercial lending portfolio consists of approximately $1.2 billion in loans. The majority of their loans are for multi-family housing. But the company also caters to mid-sized offices and neighborhood retail.
On top of that, RAIT Financial owns about $900 million of real estate. About $600 million of that are multi-family properties.
RAIT has two in-house management companies. One of them, Jupiter Communities, concentrates on the multi-family properties. They manage 12,000 units, 3,000 of those for third parties.
Their other in-house management company is known as CRP Commercial.
Everyone involved in real estate has had a nasty few years. But it’s good for us investors. Some companies, like RAS, are coming out of their slump, still heavily discounted.
At the end of the Q2 2009, RAS had an allowance for losses of $237 million. That year the company had a net loss of over $427 million.
By 2010 management turned the company around and generated a net income of nearly $111 million. Their provision for losses was down from $226 million in 2009 to $38 million at the end of 2010.
Another positive sign is the resumption of dividend payouts. In Q2 2011 the company paid out a quarterly dividend of $.06 cents a share. Definitely an improvement over last year’s payout of nothing.
KEY METRICS ANALYSIS
Trailing P/E 4.2 x
Price / Sales 1.1 x
Return on Assets 1.4%
Insider ownership 3.9%
Short Ratio 2.6 x
Current Ratio 8.5 x
Total Debt To Equity 2.1 x
There are a couple of exciting things going on for RAS.
The biggest news is their acquisition of another non-publicly traded REIT known as Independence Realty Trust. It is also focuses on multi-family properties.
RAIT will be the external manager, and receive a fee for their work.
Another important aspect of the multi-family residential properties is their occupation levels. With more people out of houses, and fewer homes being built, more people are renting.
At the end of March 2010 their properties had 71% occupancies. By the end of March 2011 that was up to 82%.
Now that the occupancies are strengthening, property managers can begin pushing rents higher.
Scott F. Schaeffer – CEO
Jack E. Salmon – CFO
Raphael A. Licht – COO
Kenneth R. Frappier – Chief Credit Officer
Chart Courtesy of StockCharts.com
The recent slump on Wall Street has hit the REITs hard. That just makes it a better time to invest.
Over 30% of RAS is now held by various funds and investment banks. Many of those jumped into the stock earlier this year.
RAS’s 52-week low was $1.30 and the 52-week high was $3.78. Right now the stock is trading at $3.48. The 50-day moving average is near $2.19 a share and the 200-day moving average is at $2.47. The company has a market cap of $141 million and 38.4 million shares outstanding.