Global Opportunities Beyond the Radar

The Contrarian’s Income: 7.12%

Business man touching light of idea


The beauty of success is that every path to it is unique.

This is the case in investing. I started with my first shares in Robert Jones Investments Ltd [RJI] on the NZX at the age of 17.

Those were the days when you visited a sharebroker to buy your shares. A few weeks later, a picturesque share certificate would arrive in the mail.

Then, as now, my interest in property led me to search for it in an affordable way on listed markets. Back in those days, Jones was one of the leading property investors in the country. He wrote books about the subject.


Source: Renaissance Books


I recall reading his books from the library in the late 1980s. It was a pity I didn’t buy them, because they would have made better investments than the shares in RJI. Costing around $12 back then, copies today sell for $120+.

Today, we’re at a juncture with REITs (real estate investment trusts). Many sit at a discount of 20% on NAV (net asset value). Those with debt (gearing) over 40% have been more roundly punished.

It’s a simple equation. The cost of debt is due to come down as central banks get inflation under control. This should improve both the bottom line and valuations for many listed REITs.

Meanwhile, dividends — yielding from 5.5% to 8.5% (amongst our target REITs) — pay investors to wait.

It’s important to keep a close watch on cash flow, occupancy, and rents. Those are the vital signs for REITs getting over the line to growth. And flourishing when a more benign interest-rate environment arrives.

But investors seeking passive income also need to build diversified portfolios. We need to look beyond REITs.

So, what other income-generative areas of the market could present value now?


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