As we enter election week, the markets are headed for some volatility. But there will also be some attractive near-term money making opportunities.
Recent polling suggests that Joe Biden is leading Donald Trump in four key states. Increasingly, it seems that the U.S. elections are headed for a nail-biting finish.
From an investment perspective, there is a sense of fear that a Biden win could be bad for the economy and stock markets. However, Clinical Professor of Finance David Kass at the University of Maryland’s Robert H. Smith School of Business disagrees. In an e-mail to Investor Place, Professor Kass said:
“Although former Vice President Joe Biden is planning to raise taxes on high income earners and corporations, he is also planning to spend more to stimulate the economy by assisting those who were hurt by the lockdowns and overall reduction in economic activity induced in response to the coronavirus. Additional investment and spending on infrastructure should create many jobs.”
Additionally, David believes that contrary to fears, the stock market will do well over time under a Biden administration:
“An easing of tensions with our trade partners in Europe and with China, including the reduction or elimination of tariffs, should lead to a substantial increase in international trade and improved economic well-being for all countries involved. The stock market should do well over time as President Biden’s economic policies will result in greater stability in both domestic issues and international relations.”
I’m in agreement with Professor Kass, and believe investors should keep some stocks, ETFs and REITs on the radar for a potential Biden victory.
Let’s discuss 4 REITs to buy for a post-election Biden bump:
- American Tower Corporation (NYSE:AMT)
- Brookfield Renewable Partners (NYSE:BEP)
- CareTrust REIT (NASDAQ:CTRE)
- First Industrial Realty Trust (NYSE:FR)
Let’s take a look at how these 4 REITs to buy can benefit from Biden’s economic plans for the next few years.
4 REITs to Buy For A Biden Bump: American Tower Corporation (AMT)
AMT stock, which has moved higher by just 5.7% in the past year, is among the top REITs to consider if Biden emerges victorious.
One of Biden’s major policy plans is to invest in rural broadband infrastructure. The Presidential candidate has the vision of expanding broadband or wireless broadband via 5G to every American. For this, an investment of $20 billion has been planned.
Big picture, American Tower is a leading independent owner and operator of telecommunications real estate. This REIT has a global portfolio of 181,000 communication sites, with 41,000 of those sites in the United States.
With the planned expansion of broadband infrastructure in rural areas, the company’s investment in new assets is likely to increase. This will translate to higher revenue from both new and existing tenants. AMT stock already has a health dividend yield of 1.99%. I expect payouts to increase over the next few years if Biden emerges triumphant.
I must add here that global 5G infrastructure spending is expected to double for 2020 when compared to fiscal year 2019. China has already been outspending the United States in terms of 5G infrastructure. This is liable to change under Biden, and American Towers stands to benefit.
Brookfield Renewable Partners (BEP)
Another area of focus for Biden is clean energy. The Presidential candidate plans to build a road-map to “achieve net-zero emissions, economy-wide, by no later than 2050.” A total investment of $2 trillion is planned for the infrastructure and clean energy sectors.
A Biden bump would therefore be positive for REITs in the renewable or clean energy business. BEP stock is among the most attractive clean energy REITs. The stock has already trended higher by 63% over the past year. I would not be surprised if the positive momentum sustains if Biden wins the elections. In addition, BEP stock also has an attractive dividend yield of 3.2%.
Talking about the potential for growth, New York has 28% renewables generation and California has 32%. In order to meet the nationwide target for FY2050, aggressive investment is needed in the coming years. Brookfield Renewable stands to benefit; the company expects $5 to $10 trillion of investment into the renewables sector in the coming decade.
From a financial perspective, Brookfield has an investment grade balance sheet and a liquidity buffer of $3.4 billion. Comfortable financial headroom will allow the company to invest aggressively and increase dividends at the same time.
Beyond the election catalyst, I also like the fact the Brookfield is diversified across North America, Latin America, Europe and Asia. The adoption of renewables is lower in countries like China and India. Therefore, Brookfield has a long-term growth visibility with presence in these countries.
CareTrust REIT (CTRE)
Biden has a comprehensive plan for the healthcare sector. Key elements of Biden’s healthcare policy include affordable access to health insurance and a less complex healthcare system. In addition, prescription drug reforms and healthcare for all are priorities.
Given this plan, it makes sense to have a healthcare REIT in the portfolio if Biden secures an electoral majority. CTRE stock, which has declined by 29% over the last year, is worth considering. A Biden win could reverse sentiments for CTRE stock, which currently provides a dividend yield of 5.85%.
As of June 2020, the REIT had 212 assets with a total investment of $1.7 billion. These assets provided an attractive yield of 9.7%. The company also has strong geographic diversification, with a presence spanning 28 states. In addition, with an extended lease maturity profile, there is clear cash flow visibility.
Given the revenue visibility, the company’s fund flow from operations per share has been very stable in the last few years. If there is an expansion in the number of facilities in the coming years, the FFO can accelerate. This can trigger upside for CTRE stock.
Overall, with a strong tenant base, healthy rental yield, attractive dividends and stable credit metrics, CTRE stock is attractive.
First Industrial Realty Trust (FR)
The United States is primarily a consumption-driven economy. Biden plans to focus on the manufacturing sector to create a finer balance of consumption and investment driven growth. It’s estimated that Biden’s plan would result in “2 million more manufacturing jobs and $500 billion in additional annual GDP by 2025.”
Therefore, industrial REITs can trend higher if Biden is elected as the next President of the United States of America. And of REITs to choose from, I like FR stock. The REIT has a focus on bulk and regional warehouses.
If the manufacturing sector gains traction, it’s likely that the demand for warehouse space will increase in the coming years. The COVID-19 pandemic has also accelerated the growth of e-commerce, and logistics real estate REITs stand to benefit.
From a financial perspective, this REIT’s FFO per share has grown at a CAGR of 6.1% in the last five years (FY2020 guidance included). FFO growth can accelerate with focus on the industrial sector. This would also imply high dividend pay-out in the coming years. FR stock already has an attractive dividend yield of 2.5%.
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector. As of this writing, Faisal Humayun did not hold a position in any of the aforementioned securities.