As I mentioned in the previous post, mall REITs continue to be a good buy. First it was JCPenney that had a bad quarter. Then, Foot Locker also showed a bad quarter that also caused a drop in retail stocks and mall REITs. WPG, Washington Prime Group, had plenty of cash flow to cover these retail shops revenue drop. This includes paying the dividend to investors. There is always the challenge in playing defensive in this space. I believe playing defensive means making sure you have the cash flow to back up any investment that you take in. This is especially true in this cycle in the stock market where things are all overvalued. You want to find industries that are weak where there is an opportune time to purchase and that you know in the long-term will be valued correctly.
This is why Mall REITs are a good investment but the reason I recommend WPG is that it pays a strong dividend that is over 10%. It also is a small mall REIT that are mostly based outdoors and have a strong diverse base of retail restaurants and shops that will be able to take on the downturn that some of the retail stores that will affect its sales. It also is taking steps to transition stores like Sears, JcPenney, and Foot Locker to more stable tenants. I believe the dividend will keep you protected in the long run as well.
Outside the mall REITs, Target had a good quarter recently. It is a bigger player and a challenger to Amazon. It isn’t without the risk but it does pay a nice 4% dividend. Having been able to turn a nice quarter in a dismal retail quarter for most companies shows that Target is able to withstand the market issues and handle the situation.
I recommend investors look at both WPG and TGT for long-term buy and hold plays. I do own both in a retirement account.