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Friday, 02/21/2003

What about Real Estate Companies that offer DRIPS?
by Steve Gail

I don't have to tell you, you can see it on just about every major business channel. With all the uncertainty; coupled with the doom and gloom that persists in the current equity market environment, it seems amazing that this country's Real Estate market just keeps rolling right along. With interest rates at or nearing historical lows for the last 20 years, it seems that everyone wants to jump on the bandwagon and take advantage of this low interest rate real estate favoring environment. Needless to say, if you are a believer in the strength of the current real estate market, there are several situations that might offer you an opportunity to participate with a Dividend Reinvestment Program. Here is the short list for your perusal: (* short list meaning, that there are only a few companies in the real estate sector that offer DRIPS. This is not a recommended list, but just a list of Real Estate companies that currently offer DRIPS. )

However, the ultimate key is to able to find companies that offer both the a Dividend Reinvestment program in conjunction with an optional cash purchase plan, so that you may maximum any contributions that you might want to make in that company's DRIP. Unfortunately, only two(2)companies offer both options in the Real Estate field. As you can imagine, that makes the list of candidates even shorter: (see Exhibit B below) Caveat: These companies are not recommendations, but only companies the offer DRIP plans that are in involved in the Real Estate field.


Parkway Properties (PKY), which is involved in various real estate projects with equity positions in private and/or publicly traded companies. Parkway owns nearly 50 properties in 11 states and approximately 7 million square feet of space. They operate an expense sharing agreement with various affiliates (e.g. Eastgroup Properties, Eastorer, and Congress Street). Parkway currently pays $2.54 a share with a current dividend yield of 7.3%, however their overall financial health is rated sub standard (D+ by Morningstar), which leaves something for potential investors to consider. Remember from our last article, there are many variables that make up your final decision before you should select which company or companies to start your DRIPS with.

Finally, lets examine our remaining DRIP candidate

W.P. Carey and Company (WPC), is a leading lessor of net leased corporate real estate. W.P. Carey and Company was founded in 1973 and their specialty is corporate real estate financing through sale-leaseback structure. They own 184 properties, in 34 states and have a presence in Europe. These properties consist of well over 20 million square feet of space. They currently pay $1.71 a share dividend, with an effective current yield of 6.9%. In addition, W.P. Carey and Company has an A+ financial Health rating [source Morningstar rating service], which again is a consideration an investor might want to ponder before making a final chose of a company for one's DRIP plan.

As you can see, there is not a very long list of DRIP plans that are Real Estate oriented, and even less that offer both the DRIP and a optional cash purchase program. However, if one has an inherent interest in Real Estate, the list of companies above was ones to consider.

In closing, you will find a graph below comparing the total return for each of the aforementioned companies for the prior 5-year period. Caveat: Remember past performance in no way guarantees future results.

EXHIBIT B: [ source Morningstar ]

So until next time,


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