Should you pay attention to these REITs? - Kalkine Media

August 09, 2023 02:06 AM PDT | By Akanksha Vashisht
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Summary

  • REITs offer an easy and accessible method to invest in the real estate sector.
  • Ellington Financial Inc., an REIT focused on residential mortgage-backed securities, has a dividend yield of 13.53% based on Tuesday’s closing price.
  • Chicago Atlantic Real Estate Finance Inc., commercial sector REIT, has a dividend yield of 12.18% based on Tuesday’s closing price.

The real estate sector is often considered a dependable method to invest one’s money. Property prices are generally expected to increase with time, given that there is no external factor affecting it negatively.

Real Estate Investment Trusts or REITs, alternatively, are an easier and more accessible method form of investing in the real estate sector. REITs invest the pool of funds received from investors into the real estate sector, to generate returns, which are then disbursed to the investors.

Most importantly, REITs act as a diversification in a portfolio and allow investors with limited capital to gain exposure to the real estate sector.

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With that, let us examine two REITs that can be an interesting watch during this earnings season:

Ellington Financial Inc. (NYSE: EFC)

Ellington Financial’s primary investment is made across the residential mortgage-backed securities that are guaranteed by U.S government. The company also invests in corporate debt and equities, loans and asset-backed securities.

For Q2 2023, Ellington Financial generated net income to common stockholders of US$2.9 million, which corresponds to an EPS of US$0.04. Meanwhile, EFC’s interest income was US$88.09 million in the June 2023 quarter as against US$87.17 million in the March 2023 quarter.

However, the REIT’s net income was US$10.73 million in Q2 2023, lower than Q2 2022’s net income of US$55.49 million. Ellington Financial reported cash and cash equivalents of US$194.59 million as of June 30, 2023.

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EFC declared a monthly dividend of US$0.15 per common share. The dividend is to be paid on September 25, 2023, with an ex-dividend date of August 31, 2023.

Based on Tuesday’s closing price of US$13.30, EFC has a P/E ratio of 30.5x and a dividend yield of 13.53%. As at the close of trade on August 8, 2023, the stock price rose 1.06% monthly and 6.57% YTD.

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Chicago Atlantic Real Estate Finance Inc. (NASDAQ: REFI)

Chicago Atlantic is engaged in financing the commercial real estate sector. The REIT company has a market cap of US$279.28 million.

REFI generated a net interest income of US$14.9 million during the March 2023 quarter, which was 1% higher sequentially. Meanwhile, the company’s net income was US$10.7 million during Q1 2023, which represented a sequential increase of 46.3%.

Chicago Atlantic’s total assets as of March 31, 2023, were US$322.88 million. During the quarter, the company reported an 88% increase in the percentage of loans bearing a variable interest rate as compared to the December 2022 quarter.

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For Q2 2023, the REFI announced a dividend of US$0.47 per common share, which was paid on July 14, 2023. 

Based on Tuesday’s closing price of US$15.44, REFI has a P/E ratio of 7.88x and a dividend yield of 12.18%. As at the end of trade on August 8, 2023, the stock price grew 1.25% monthly and 2.18% YTD.


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