Summary
- I will provide a textbook example of a blue-chip REIT, and in fact not just a blue-chip but “the bluest of the blue-chip REITs”.
- Realty Income is the “crème de la crème”, the peach cobbler REIT, or the “bluest of the blue chips”.
- “Do you know the only thing that gives me pleasure? It's to see my dividends coming in.” John D. Rockefeller.
- Ralph Block, author of Investing in REITs, as not only a friend, but a highly-respected teacher, investor, and author. He is missed by all.
- This idea was first discussed with members of my private investing community, Intelligent REIT Investor. To get an exclusive ‘first look’ at my best ideas, subscribe today >>
In one my favorite books, Investing in REITs, Ralph Block wrote:
“Blue-Chip REITs take you safely through the ups and downs in the sector’s cycles and deliver consistent, rising, long-term growth in FFO and dividends, because they are financially strong and widely respected, they will always have access to the additional equity and debt capital that fuels the growth engine.
They will not always provide the highest dividend yields or even, in many years, the best total returns, nor can you buy them at bargain prices – buy they should provide years of double-digit returns with a high degree of safety. These are the REITs least likely to shock investors with major earnings disappointments and will provide very satisfying total returns.”
Block writes that “the quality attributes of blue-chip REITs should be the standard by which all REITs are measured. Those qualities are: (1) outstanding proven management, (2) access to capital to fund growth, (3) balance sheet strength, (4) sector and geographic focus, (5) substantial insider ownership, (6) low payout ratio, and (7) absence of conflicts of interest.”
As I ponder the list of blue-chip traits, three of these characteristics appear to be critical to a REITs ability to out-perform: balance sheet strength (access to capital), scale (sector/geographic focus), and management. The others are also important, but in my opinion, these three are the keys in separating a blue-chip REITs from the others.
