This is a guest post contributed by KW from @investingnugget
From the “Comic Strip – Basic Metrics of REITs” post by REIT-TIREMENT, several key REIT fundamental metrics were brought up. In this post, we will build on that, and look at how to interpret these metrics intuitively. Real data will also be used to illustrate key points, and to show how the different metrics are related to each other.
1) Dividend Yield
Logically, a riskier investment would warrant higher potential returns, in the form of higher dividend yields, as a form of compensation for the investor. Think of it as “High Risk, High Returns” in a way.
2) P/NAV Ratio
In an ideal world, if a counter gets delisted/taken private, the assets would be liquidated/sold, and the proceeds returned to investors. In this sense, a P/NAV of 1 would mean that if a counter is delisted, investors will get back whatever money they put in. Hence, a riskier investment would reflect in a lower P/NAV ratio