New Buy LXP

14 Apr 2018 13:21
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It has been a few months but I finally built up enough cash in my Roth to make a purchase and grabbed 126 shares of Lexington Realty Trust (LXP) with a dividend yield of 9%. I only buy REITs in my Roth IRA due to the tax advantages and hopefully the strategy pays off 10 years from now when I retire.

LXP’s high yield was hard to pass up and its stock price has been depressed for some time due to a combination of a fear of rising interest rates and slowing of property portfolio growth. The latter portfolio growth concern translates into a very boring but predictable REIT that increases its dividend payout on average 2% a year. There are not too many investments that offer a 9% yield plus 2% growth and a dividend that is well funded as they currently have an AFFO payout ratio of 72.4%.

LXP is a diversified REIT in the office and industrial sectors and have been slowly migrating to single tenet net leases that offer predictable income and long lease contracts. They have 174 properties in 37 states with 48.6 million square feet with 98.9% of that currently leased.

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From an income perspective they are well diversified with the highest tenet representing only 4.2% of rent income.

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The largest concern from a diversification perspective is in its geography where 16% of their portfolio is concentrated in Texas. If the Texan economy becomes negative in the future it could be an issue.

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