jhains2
Long

Long $VER on Dividend Growth Prospects

NYSE:VER   VEREIT INC
4 0 1
it is not so common to see a channel as well-defined as this one.
Of course, right now the stock is not near the lower end of the channel.

Here's why this REIT is in an uptrend:
New CEO             (March 2015) is getting to the end of an asset sale program that is designed to reduce leverage so that the company regains investment-grade credit ratings. The completion of that program, expected this year, puts the company in a position to begin raising its dividend and using FCF to acquire prperty and grow.

VER's dividend yield of 5.0% (at $11) is materially higher than that of peers O (3.4%) and NNN (3.4%) which both enjoy higher credit ratings of Baa1/BBB+.

VER's attraction relative to those peers is that it currently has a lower payout ratio relative to AFFO. This means that once dividend increases begin, it should be able to grow the dividend at a faster rate than its competitors as it normalizes its payout ratio. Since a higher dividend growth rate should lead to a lower comparative dividend yield, other things being equal, VER's yield should continue to compress relative to those of NNN and O.

Warning: Because REITs are very interest rate-sensitive, if the market comes to expect rising interest rates, that yield compression might happen via a share price declining less rapidly than that of peers.
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