Missed Nvidia's 44,000%? This is the next big opportunity |
In 2016, Nvidia traded at just $2.51 split-adjusted. |
A little-known pattern signaled the opportunity long before Wall Street caught on. |
Now, that same pattern has appeared again. |
One analyst believes a little-known company today is in a remarkably similar position — and he's revealing the name and ticker in a new free presentation. |
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🔑 The REIT number that isn't earnings |
Payout ratios built on net income make healthy REITs look stretched. Funds from operations is the number that actually applies. |
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🌙 TONIGHT'S NUMBERS |
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The 10-year Treasury on August 10, per the Fed's H.15 release, up from 4.63% a week before. |
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The 10-year TIPS yield the same day. That is what a Treasury pays you above inflation. |
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Paid advertisement from Porter & Co. Past performance is not indicative of future results. All investing involves risk of loss including total loss of principal. Not investment advice. |
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Pull up almost any real estate investment trust and the payout ratio will look wrong. A REIT distributing well more than it earns, quarter after quarter, sometimes by a wide margin. On a utility or a consumer staple that would be a warning worth acting on. On a REIT it is mostly arithmetic. Depreciation is a large non-cash charge written against a building that may be worth more today than it was ten years ago, and it runs straight through net income on the way to the bottom line. The industry's own measure, funds from operations, adds that depreciation back and takes property sale gains out. FFO is closer to the cash the buildings actually threw off. |
Which means the coverage question for a REIT is the payout measured against FFO, not against earnings per share. That one substitution changes the read on a great many income names, and it is why the sector can keep lifting distributions in years when reported earnings barely move. It also explains the 90% rule, the requirement that a REIT distribute at least 90% of its taxable income to keep its tax status. That is a floor under the payout rather than a sign of strain. S&P Global Market Intelligence expects U.S. REITs to distribute roughly $61.5 billion in 2026, about 4.9% more than last year. None of that requires reported earnings to grow in step. |
That does not make a REIT distribution safe. FFO can fall, and when it does the payout follows it down. Simon Property Group, run by chairman and chief executive David Simon, declared $2.10 a share in the first quarter of 2020 and cut to $1.30 on June 29 of that year, a reduction of about 38%. Holders reading the yield rather than the cash flow found out the slow way. The declared dividend worked back to $1.90 by the fourth quarter of 2023, still short of where it began almost four years earlier. The right ratio tells you whether today's payout is being covered. It tells you nothing at all about whether next year's rents hold up. The filing says more than the yield does. |
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Paid Advertisement. Results are not typical and will vary. Digital assets involve substantial risk including total loss of investment. Past performance does not indicate future results. Not investment advice. Paid affiliate advertisement. Educational only. DM Intelligence LLC dba Decentralized Masters are not licensed financial advisors. Results are not typical and will vary. Digital asset investing involves substantial risk including total loss. Past performance does not indicate future results. |
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💵 INCOME WATCH |
Declared. AdvanSix declared a quarterly dividend of $0.16 a share on August 7, payable September 1 to holders of record on August 18. Blue Owl Capital Corp declared a third-quarter base dividend of $0.31 a share on August 4. Broadridge's 12% annual raise, filed August 3, was covered here last week. A quiet stretch otherwise. |
Ex-dates ahead. AdvanSix's record date of August 18 puts its ex-date at the start of that week. Beyond that, the next five trading days look thin for widely-held income names, and I would rather report the calendar as thin than guess at dates. |
Yield check. The 10-year Treasury was 4.72% on August 10, against 4.63% on August 4. The 30-year sat at 5.25% the same day. SCHD's forward yield was 2.95% as of August 11. |
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📅 TOMORROW'S CALENDAR |
Producer Price Index for July, 8:30 a.m. ET. Read the services line first. It feeds the Fed's preferred inflation gauge more directly than the goods line does. |
Weekly jobless claims, 8:30 a.m. ET. The single week matters less than whether the four-week average has started drifting in one direction. |
The Fed's H.15 selected rates release, 4:15 p.m. ET. Wednesday's 10-year print lands there, and that is the number every income comparison in this letter starts from. |
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You probably own a REIT somewhere. Do you track its FFO payout or its yield? I'd like to hear it, just reply. |
— Randy Cole, Editor |
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P.S. Our SpaceX listing briefing is free from the Money Memo desk if you would like a copy. (From The Money Memo) |
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