2CHYP positioning for 2018
2017 has been a rough year for REITs with the sector massively underperforming the S&P. As value investors, this backdrop makes us more bullish on 2018 as the value gap between REITs and the broader market has widened. REIT yields are now approximately 4% on average which approximately doubles the yield of the S&P. 2CHYP’s yield is even higher than that of REITs. Tax changes, including a deductibility of qualified REIT dividends make REIT ownership more favorable and should give the sector a relative edge going forward.
With the year coming to a close I want to provide an update as to what you can expect from 2CHYP in the coming days and weeks. Each quarter, we produce profile sheets on each stock held in 2CHYP detailing why we hold the position and our view of its fair value. These are reflective of our bottom up stock selection approach with each position chosen for its individual ability to outperform the market.
At a portfolio level we produce quarterly analytics which show valuation, dividend yield and dividend coverage of the portfolio as a whole.
The goal of 2CHYP remains to maximize total return and the engine that creates this return is an attempt to create an ever increasing flow of dividends which are fully covered by FFO. The market does not always cooperate in terms of capital gains, but dividend growth can be achieved without market cooperation and is far more reliable so long as we do proper fundamental due diligence.
Commentary may contain forward looking statements which are by definition uncertain. We retain no obligation to update or correct forward looking statements should the available information change. Actual results may differ materially from our forecasts or estimations.