The health care sector and companies with European exposure provide the best REIT investment opportunities for the remainder of 2012, according to Jenny Harrington, CEO and portfolio manager with Gilman Hill Asset Management LLC.
While fundamentals are strong in the multifamily sector, its stock prices are expensive, Harrington said.
“When you look at health care REITs, I think there’s unbelievable growth there, but maybe because of some political concerns and concerns about the health care bill, there has been a little bit of a cap on the stock prices,” she told REIT.com during a taping in New York at REITWeek 2012: NAREIT’s Investor Forum. “So, I think those concerns will dissipate, and maybe the health care REIT sector could improve a little bit more.”
However, Harrington said there can be a wide disparity between companies, even within the various individual sectors. She added that “it’s hard to paint anything in REIT world with a broad brush.”
Despite concerns in Europe and the fact that some stocks that have connections to the country have taken a hit in the market, she said she is bullish on stocks with exposure there.
“The businesses in Europe are fine. Their cash flows are secured, but there’s pressure on the stocks,” she said.
Additionally, Harrington said in an uncertain economic environment like today, she likes to look at several factors when trying to decide whether or not to invest in a REIT. For example, when a company of 20 years has a history of increasing dividends every year, she said provides a “huge comfort” for investors.
“As an investor who primarily focuses on dividend income, the first things I look at are dividends. They are a great way of seeing what the company's history has been and what the cash flows behind them have been over that period too,” Harrington said.
She added that one of the silver linings of the financial crisis that stretched through 2008 and 2009 was that it served as a stress test on the industry. She noted that a number of REITs maintained and increased their dividends throughout the period.
“As an investor, I'm able to look back on that and say, ‘Given the worst case scenario, this company was able to maintain that, and they’re in even better shape now, so they’ll probably hold up in the future,’” she said.