Stable 2% Dividend on this Alternative Asset Manager

Jay Peroni, Lead Analyst, CEO and FounderBlog (Members), Blog (Public), Crisis Investor, Dividend Income Investing

Hard Assets

Many investors have been worried about the next crash now that stocks are at all-time highs. What goes up must eventually come down, right?  A Super Cycle Crash could be right around the corner. It’s tough to pinpoint the exact timing before a crash, but the next crash will be here before you know it as they are an inevitable part of investing.   Could hard assets save your portfolio?

“Hard assets” like timber and coal, crude oil, commercial real estate, along with metals like gold, silver, and copper are not correlated to the stock market’s returns. These non-correlated assets add diversity to investors’ portfolios and can actually help improve portfolio returns while lowering overall risk.  In fact, real estate and other hard assets can be good investments during economic upheaval.

Ibbotson Associates, a world-renowned financial research firm, conducted a long-term study showing that even a modest 10% allocation to these “real” assets, can increase the overall expected return of a low-risk portfolio from 8.1% to 8.6%.  Ibbotson has also shared over 40 years of commodity market data, which revealed that over long periods of time, commodities often outperfom stocks.

Today’s investment idea takes a look at a management company that is in the hard asset management business…

Solid Alternative Asset Management

Company:                 The RMR Group (RMR)

Industry:                   Real Estate

Sector:                        Real Estate Management & Development

Dividend:                 $1.00 annually per share

Yield:                           1.95%

Dividend Safety:    Grade A

Profile: The RMR Group (RMR) is an alternative asset management company that was founded in 1986 to invest in real estate and manage real estate related businesses. RMR’s business primarily consists of providing management services to publicly traded real estate investment trusts, or REITs, and real estate operating companies. As of December 31, 2016, RMR had approximately $27.2 billion of total assets under management, including more than 1,400 properties, and employed over 450 real estate professionals in more than 30 offices throughout the United States; the companies managed by RMR collectively had over 53,000 employees.

Chart:


Reasons to Buy

  • Solid 2% dividend on an alternative asset management firm.
  • Has a solid group of well established clients: Hospitality Properties Trust,  Five Star Quality Care, Inc., Senior Housing Properties Trust, TravelCenters of America LLC, Government Properties Income Trust,  Sonesta International Hotels,
    Select Income REIT, and RMR Funds.
  • RMR earns fees pursuant to 20 year Business Management Agreements and 20 year Property Management Agreements with the managed REITs.
  • RMR has grown by working with its clients to expand their businesses and by creating new clients.
  • Since 1986, RMR has assisted its clients in completing over $32.0 billion of financing in over 150 capital raising transactions.

5 Point Stock Inspection

  1. Earnings Trend: Grade A
  • Earnings growth running above 25% for 3+ years
  • Positive Analyst Earnings Revisions
  • Earnings growth last quarter greater than 20% over same quarter last year
  1. Financial Health: Grade A
  • Stronger financial profile than 97.93% of stock universe
  • Solid Sales Growth: Healthy 3-year growth
  • Free Cash Flow growing for 3+ years and in top 30% of all stocks
  • Net profit margin greater than industry average
  • Long term debt to equity is less than 1
  1. Momentum: Grade A
  • Strong Momentum: Stock in top 30% of all stocks.
  • Relative Strength is 93 out of 100
  • Stock up over 100% over the past 12 months
  1. Risk: Grade B
  • Medium risk
  • Beta in line with market (0.97)
  • Has lower risk profile than just 39.87% of stock universe
  1. Valuation: Grade B
  • P/E less than industry average
  • PEG Ratio less than 1
  • Forward P/E at 7.27, is less than industry average
  • Good buy under $55/share

Overall:  Grade A

Bottom Line

The RMR Group (RMR) is a solid choice if you are looking for some growth and income. It is a great way to gain exposure to alternative hard assets and collect a healthy dividend along the way.

 

Additional Reading:

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Disclaimer

While Dual Returns has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.