When Real Estate Investment Trusts (REITs) stumble,
many consider that a sign of potential perilous future business conditions. As malls have deteriorated in recent years, many mall and commercial real estate landlords have had difficulty. And things recently are not looking great.
The stock of two major REITs are showing weakness. Macerich (MAC) is bouncing around at its 52-week low, it’s PE Ratio is close to 50, and its dividend ratio is over 400%. It was over 700% earlier.
Realty Income (O) PE Ratio is over 50 and its dividend ratio is close to 200%. To be fair, its stock is more stable, and while near 70% of its 52-week range, it has been higher more recently. And its dividend ratio has come down recently; it was over 220% a few months ago.
Not being a stock analyst, I can only speculate. However I like to look for trends. And the state of these two stocks are telling. Each REIT has a different mix of clients and locations so their prospects rely on their customers’ capability to ssurvive and prosper. Additionally, REITs can live and die by interest rates. So changes in interest rates can have a dramatic influence on their business prospects. (Disclosure: Long MAC, O.)
What does the state of some companies tell you about the state of the economy in general? Send a comment here.
The weight in the Form of a Hippopotamus Head is courtesy the Cleveland Museum.
The post Is The State of Real Estate Trusts A Harbinger of Business Conditions? was first published on Smile If You Dare.