3 REITS for Diversification – SCG, LLC and GMG

A well balanced and diversified portfolio takes into account some key real estate asset stocks. Why these become relevant is owing to the risk factor attached to the stocks. Australian real estate investment trusts (REITs) generally are associated with low risks and higher returns unless the macro cycle acts adversely. Below are examples of 3 REITS that have been known and explored for diversification per se over the last good number of years. Not all of them proffer a buying opportunity at the moment but nonetheless have performed well in the past and few still have potential for future.

Scentre Group (ASX: SCG) recently bought 50 percent stake from the Saunders family's Terrace Tower Group for $720 million in Sydney's south?east of Westfield Eastgardens. This deal was struck on a cap rate of 4.25 per cent. Chief executive Peter Allen of Scentre has indicated that the group has significant redevelopment potential for both mixed-use development and retail expansion. Scentre Group was seen to be trading at a market price of $4.230 as at market open on August 03, 2018; and the stock has seen a performance change of 2.17% over the past 12 months, as at August 02, 2018. The group trades at a lower P/E Multiple and has a dividend yield of 5.1%.

Lendlease Group (ASX: LLC) is a real estate stock which is into retail property management, asset management and development and operates across the globe. The company’s stock was trading at a market price of $20.97 with a daily price change of $0.300 and a percentage change of 1.45% as at August 03, 2018, market open. The company has been emerging as a standout among the ASX200 for being able to maximize the benefits in terms of inclusive growth. LLC has a dividend yield of 3.3% and trades at a P/E multiple of 14.76x, which is higher in comparison to many peers. In one year, the stock moved up about 26% and is now at its 52-week high level.

Goodman Group (ASX: GMG) is also under real estate sector and is into business space property and international industrial, development and funds management business. The company’s stock was trading at a market price of $9.86 with a 1.34% price change, as at market open on August 03, 2018. The stock has seen a performance change of 21.93% over the past 12 months as at August 02, 2018. Goodman Australia Development Partnership, Goodman Australia Industrial Partnership, Goodman Australia Partnership, and KWASA-Goodman Industrial Partnership are the four properties that the company has invested in. By building logistics property for Amazon, the group has been riding the e-commerce wave, and has delivered a leading performance in the last 12 months. GMG has a dividend yield of 2.8% and trades at a P/E multiple of 22.89x, which is higher in comparison to many peers. Like LLC, the stock is up quite a bit and trades close to its 52-week high level.

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