In my personal portfolio I hold a diversified basket of REITs. They allow me to have exposure to income-producing real estate, without actively managing properties myself.
REIT investors can own a part of thousands of properties in all types of real estate across the world – from residential real estate in New York to data centers in Singapore, the choice is yours as a REIT investor.
It is also totally passive – you don’t have to deal with evicting tenants or managing trash collection, professional REIT management does all that for you.
Currently most undervalued REIT
I currently find Iron Mountain(IRM) to be an undervalued high yield REIT with strong prospects.
Iron Mountain is a very unique REIT as it focuses on storage and information management across the globe.
The company’s mission is:
Around 95% of Fortune 1000 companies are IRM’s clients.
They store a variety of records, data and goods at IRM’s secure locations. Documents that legally have to be stored for a set amount of time, expensive art and most recently – digital data.
This is a very “sticky” business, as IRM receives a fee for storing the documents for a long duration.
The company is also adapting to modern times – investing in data centers to store digital data.
High-Yield Dividend
Whilst normally such a high yield might be a warning sign, in IRM’s case they can comfortably cover the dividend through the cash flows generated.
On aFFO basis, the dividend is covered with a 82% payout ratio. The company expects the payout ratio to glide to an even safer 60-70% level as aFFO grows over the next few years.
Company statement from recent presentation:
Using my Dividend Growth Calculator, I estimate that this company can provide significant income on current investment by the time I retire, especially if I keep re-investing dividends in the meantime.
Summary
REITs are a great way to invest in all types of real estate globally, without the added workload that comes from owning the physical property privately. I see Iron Mountain as the most undervalued high-yield REIT on the market currently. Income-oriented investors should look further into it to see if it fits their investing goals and risk tolerance.
