For immediate release
Chicago, IL – July 8, 2022 – Today’s Zacks Investment Ideas feature highlights Farmland Partners, Inc. REIT.
Invest in farmland with this high-performing REIT
While many real estate investment trusts (REITs) have had a tough start to the year with the general market, that’s not the case with the highly rated REIT we’ll discuss below. REITs are lucrative investment vehicles and continue to be a great way to balance portfolios while gaining exposure to the real estate sector.
Adding these inflow-generating investments can result in significant benefits over traditional real estate investing, including increased liquidity, greater diversification, tax benefits, and potentially higher returns with lower risk.
Real estate investment trusts own or manage income-producing real estate, normally by investing directly in properties or mortgages on those properties. The IRS stipulates that REITs must pay 90% of their taxable income to shareholders. This typically translates to much higher dividends than your average S&P 500 stock.
One of the best ways to increase returns when investing in REITs is to compound the dividends received. Investors can also choose to use a dividend reinvestment plan (DRIP), which automatically reinvests dividends received in additional shares.
Investors have the option of buying REITs directly or can choose to diversify further by investing in REIT ETFs or mutual funds. REITs not only offer above-average returns, but also the potential for future price appreciation. A potential issue for REIT investors is their sensitivity to interest rates, and given recent talk surrounding further interest rate hikes in the future, this begs the question: how have REITs gotten they behave in periods of rising interest rates?
We looked at six different historical periods over a 30-year period in which interest rates rose, as measured by the yield on 10-year Treasury bills. During these periods of rising rates, REITs generated positive returns in four of them, while outperforming the general stock market in three of them.
Our research shows that a rising interest rate environment does not translate into lower REIT prices. This is mainly because during economic expansions the value of the underlying real estate increases.
Now that we’ve established that REITs can outperform even in rising rate environments, let’s take a look at a high-performing REIT that outperforms the broader market. This REIT is a Zacks Rank #1 (Strong Buy) with substantial exposure to agricultural markets. It is part of the Zacks REIT and Equity Trust – Other industry group, which currently ranks in the top 36% out of approximately 250 industries.
Investing in stocks in leading industry groups can provide a constant ‘tailwind’ to our investment success. Because this industry is ranked in the top half of all industries ranked by Zacks, we expect this group to outperform the market over the next 3-6 months.
Farmland Partners, Inc.
Farmland Partners operates as a real estate company that owns and acquires high quality North American farmland. The REIT makes loans to farmers that are secured by agricultural real estate. The company owns approximately 155,000 acres of farmland in 16 US states. FPI has over 100 tenants and offers 26 different types of crops on its farms, such as corn and soybeans.
REIT posted a four-quarter average profit of 6.39%. Analysts have raised their full-year EPS estimates by 3.85% over the past 60 days. Zacks’ consensus estimate now stands at $0.27 per share, which would translate to a whopping 2,600% growth rate over last year. This REIT is up 18.92% year-to-date, easily outperforming the broader market.
What the Zacks Model Reveals
The Zacks Earnings ESP (Expected Surprise Prediction) identifies companies that have recently experienced positive earnings estimate revision activity. The idea is that this newer information can serve as a better predictor of the future, giving investors a head start during earnings season. Combining a Zacks No. 3 or higher ranking with a positive earnings ESP, stocks produced a positive surprise 70% of the time according to our 10-year backtest.
With an EPS on earnings +20.0% and a Zacks No. 1 ranking (Strong Buy), an earnings beat may be in the cards for REIT investors when the company reports on August 3.rd.
Be sure to keep an eye on this high-performing REIT and its performance during this period of rising interest rates.
Zacks names ‘only one best choice for doubling up’
From thousands of stocks, 5 Zacks experts have each picked their favorite to skyrocket by +100% or more in the coming months. Of these 5, Research Director Sheraz Mian selects one to have the most explosive advantage of all.
It’s a little-known chemical company that’s up 65% year-on-year, but still very cheap. With relentless demand, rising earnings estimates for 2022 and $1.5 billion for stock buybacks, retail investors could jump in at any moment.
This company could rival or surpass other recent Zacks stocks which are expected to double, such as Boston Beer Company which jumped +143.0% in just over 9 months and NVIDIA which jumped +175.9% in one. year.
Zacks Investment Research
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Past performance is not indicative of future results. The potential for loss is inherent in any investment. This document is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold any security. No recommendation or advice is given as to whether any investment is suitable for any particular investor. It should not be assumed that investments in the securities, companies, sectors or markets identified and described have been or will be profitable. All information is current as of the date hereof and is subject to change without notice. The views or opinions expressed may not reflect those of the company as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management of securities. These returns come from hypothetical portfolios composed of stocks with Zacks Rank = 1 that have been rebalanced monthly without transaction fees. These are not the returns of actual stock portfolios. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor more information on the performance figures displayed in this press release.
Just Released: Zacks Top 10 Stocks for 2022
In addition to the investment ideas discussed above, would you like to know our top 10 picks for all of 2022?
From its creation in 2012 to 2021, the Zacks Top 10 Stocks portfolios gained an impressive +1,001.2% vs. +348.7% for the S&P 500. Now our research director has combed through 4,000 companies covered by the Zacks Ranking and selected the top 10 tickers to buy and keep. Don’t miss your chance to enter…because the sooner you do, the more chances you have of winning.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.