Neglect Dogecoin and Purchase These 2 REITs – Motley Idiot

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Dogecoin (CRYPTO:DOGE) started as a joke. Its creators wanted to make a coin that no serious investor would consider. As things turned out, the joke is on them after the cryptocurrency’s price rocketed nearly 3,000% last year.

However, given its history, I can’t take it Dogecoin seriously. While its price could continue to rise as more speculators pile in, it could just as quickly become worthless if they lose interest in the cryptocurrency.

Instead of speculating on something with a binary outcome like that, I prefer to utilize what’s called intelligent speculation, a spin on ben graham’s value investing. It combines the diligent research and analysis Graham preached but exchanges the margin of safety he sought for the potential of earning an above-average return instead of an adequate one.

One sector I believe is ripe for intelligent speculation is real estate investment trusts (REITs). Here are two REITs that I think have a high probability of delivering above-average returns, making them better investment options than Dogecoin.

A person looking at investment charts on mobile devices.

Image source: Getty Images.

1. EPR Properties Trust

EPR Properties Trust (NYSE:EPR) is a specialty REIT focused on experiential real estate like movie theaters, eat and play venues, and other types of attractions. The pandemic had an outsized impact on these properties, meaning many of EPR Properties’ tenants have struggled to pay rent. That has weighed on its stock price, which has lost nearly a third of its value over the last two years.

However, market conditions have improved over the past year as the wide availability of vaccines and therapeutics have given people the confidence to enjoy experiences again. That’s enabling EPR’s tenants to pay rent, providing the REIT with the cash flow to reinstate its monthly dividend. At a more than 6% yield, EPR’s dividend is well above the sub-3% average in the REIT sector.

Higher dividend yields can suggest one of two things: the payout is at high risk of a reduction, or the market has undervalued the stock. I believe the latter is the case here. EPR recently reinstated its dividend, given its confidence in its future recovery. Further, it has strengthened its balance sheet during the pandemic, putting its payout on a firmer foundation.

That strong balance sheet gives it the financial flexibility to take advantage of opportunities to acquire more experiential real estate. While the REIT wants to reduce its exposure to movie theaters, it’s open to purchasing other property types like eat and play venues, ski facilities, experiential lodging, and gaming facilities. These deals could create even more value for shareholders in the future.

While EPR Properties is a bit more of a speculative investment, given the continued uncertainty of the pandemic, it has significant upside potential to go along with its above-average income stream.

2.SL Green Realty

SL Green Realty (NYSE:SLG) is Manhattan’s largest office landlord. It owns some of the city’s iconic office buildings and some of its newest landmarks.

There’s currently a lot of speculation about the future of the office, especially in high-cost coastal gateway cities like New York. Some believe remote and hybrid work will make big-city offices a thing of the past. That view has weighed on office REITs, sending shares of SL Green down double digits over the last two years.

However, while companies have grabbed headlines for their move to remote work, they’ve also made it clear that offices remain vital to their operations. CBRE recently reported that Manhattan office leasing topped 2 million square feet in November, 64% ahead of the five-year monthly average. It was the first time it surpassed 2 million square feet since 2019. Meanwhile, year-to-date activity totaled more than 10 million square feet, up 28% year over year.

SL Green has been one of the big beneficiaries of this improvement. It signed 1.7 million square feet of leases last year as companies start positioning for a return to the office in the coming months.

This trend soils well for the future of SL Green. It suggests that the REIT should eventually recover from the pandemic’s impact on its portfolio. SL Green certainly seems to think so. The REIT recently increased its dividend, which yields an above-average 4.6%, for the 11th straight year.

SL Green remains a bit more speculative due to the uncertainty of when companies will return to the office. However, we can intelligently wager that the probability of this occurring is growing more certain as companies sign additional leases. This means the REIT looks like a potentially high return opportunity as that thesis plays out.

Speculate the smart way

Buying Dogecoin is nothing more than speculation that the price will rise because others are willing to pay more for it in the future. While that bet could pay off, it could also fail spectacularly, wiping out your entire investment in the process.

Intelligent speculation, on the other hand, looks for catalysts that could drive outsized returns. In the case of REITs SL Green and EPR Properties, continued recovery from the pandemic is a big upside catalyst that’s already starting to unfold, meaning these two companies offer a higher probability of delivering high upside potential. That’s why I think investors should forget about Dogecoin and consider these REITs instead.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.


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