REITs - Real Estate Investment Trusts - Info & Discussion: Barron's Interview with Susan Byrne

» JenL_2 - Barron's Interview with Susan Byrne

9/3 Barron's has the latest in a string of interviews with value and fixed income fund investors. They all seem to like REITs:

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An Eye for Yield

In this market, says a money manager, look for stocks that provide high total returns

by Sandra Ward

(excerpts)

An Interview With Susan Byrne ~.... After lowering her forecast for corporate profits this year and with expectations of modest growth next year, Byrne is keeping sharply focused on "total return" investments -- companies delivering solid earnings growth, paying sustainable dividends, and offering higher returns than what are available from other asset classes. Cyclicals are in her mix, as are real-estate investment trusts and, yes, energy companies..... Her approach, honed in 30 years of investment experience, is simply to buy stocks at a discount to their growth rate in industries that are best positioned according to her macroeconomic outlook.....

Q: What does this mean for portfolios?
A: Beyond cyclicals, people should look for companies that could be considered solid total-return candidates.

Q: Companies that pay dividends?
A: Yes, and companies with the ability to grow the dividend, not just pay it. If we are talking about an environment of slow growth, low interest rates and low inflation, the big competition for your money is 2½%-3% on a money-market fund and 4½% in bonds. For some, there will be high-yield instruments, but that is not my milieu. In that kind of environment, a barbell approach that includes the best cyclical recoverers with the best fundamental valuations -- and that may or may not include technology, depending on your risk tolerance -- as well as good moderate growers with good yields should provide a rate of return modestly above the historical 8%-10% returns of the equity market.

Q: What are some of these total-return stocks?
A:...... And then there are REITs [real-estate investment trusts], which make up a big part of the new-high list. The new-high list is populated with preferreds, convertible preferreds, electric utilities and REITs.

Q: Anything with a yield.
A: Exactly. So rather than trying to come up with some idea and fit it to the market, why don't we just look at the market and see what it is telling us. You can put a package of REITs together, REITs with modest growth prospects but very nice yields and yields that are sustainable. Some companies we have in our portfolio include Vornado and Kimco. We've been adding to Equity Office Properties. Boston Properties is brand new for us. It's a developer of business properties, and the market has been very, very concerned about that because they have exposure not only in Boston but also in San Francisco. We think the concerns may be overdone. Each of the names I've given you has a yield of 6% or more and outlooks for growth in the 10%-plus range. They are all selling beneath net asset value.

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.....Jen

-- posted by JenL_2