Читать книгу The Intelligent REIT Investor Guide - Brad Thomas - Страница 23

Two better REIT comparisons to make include higher dividend‐yielding publicly traded entities such as utilities and master limited partnerships (MLPs). Utility stocks, for one, have been a long‐standing and reliable staple of the investment world. The industry's total market cap is in excess of $1 trillion, and the top 20 utility stocks have a combined value of $775 billion.

These businesses provide basic services such as electricity, natural gas, water, and wireline telephony to individuals and businesses. Competition isn't practical in most of these areas, allowing many of them to form what amounts to legal monopolies.

This is both good and bad for their shareholders. On the one hand, the utility doesn't have to compete with other providers, so its earnings and dividends are often quite stable. On the other, that stability can equate to very, very slow growth: perhaps 2–4% annually. Plus, these entities can only charge customers what the regulatory authorities permit, so they run the risk of fickle and sometimes politically motivated pricing.

In recent years, some utilities have been “unbundled,” as it were. Those that generate or purchase power, and sell it to other service providers, for example, have become much less regulated. So their growth prospects are now better. Then again, their earnings are much less certain, and their dividend yields tend to be much lower.

Accordingly, utility stocks like those of Duke Energy and Southern Company may compete with REITs for investment dollars to some extent, especially because they've proved to be less volatile than REIT shares in recent years. As such, they can be good choices for people with very modest capital appreciation expectations and total return requirements.

MLPs, for their part, aren't limited so much by industry in a legal sense. Yet the vast majority of publicly traded ones are engaged in energy infrastructure such as gas pipelines and storage facilities, varying in how much exposure they have to natural resource prices.

According to MLP and energy analyst Alerian, the total market capitalization of the energy MLPs has grown rapidly to around $225 billion ($350 billion including Canada) as of September 30, 2020. The sector was almost $800 million in 2014, but MLPs have been consolidating since 2018.

Their dividend yields in November 2020 were close to 8%, which is generally higher than those of REITs. So they can provide investors with significant current income and diversification capabilities. And thanks to depreciation and other tax advantages applicable to the oil and gas industry, much of those cash distributions are not currently taxable as ordinary income.

MLPs are like other pass‐through stock classes such as REITs, business development corporations (BDCs), and YieldCos because they're largely dependent on external capital markets and their unit counts generally rise over time.

They may trade like stocks, but they actually fall into a completely different category. Their legal structure means that investors receive a partnership K‐1 form at the end of each year, which can make tax‐return preparation challenging, to say the least. Also, if held in an individual retirement account (IRA) or other tax‐deferred account, they can potentially give rise to “unrelated business taxable income.” This would then open up their dividends to other forms of taxation under certain circumstances.

Rather like REITs, MLPs distribute most or all free cash flow to their partners. This means they'll need to raise outside capital from time to time if they want to grow, and such capital isn't always available.

All told, MLPs do compete with REITs for investment capital. However, they're different enough from each other that investors don't have to choose one over the other if they have enough capital to spread between the two categories.