The Income Machine That Keeps Pumping Cash

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Co-authored with “Hidden Opportunities.”

Ask any accomplished investor, and they will tell you that nothing comes close to cultivating multiple income streams. Passive income streams are often the building blocks for their success and the secret to preserving and nourishing their long-term wealth.

I started building this little snowball at the top of a very long hill. And the trick to having a very long hill is either starting very young or living to be very old. – Warren Buffett.

Pick #1: RQI – Yield 8%

Realty Income (O) is acquiring Bellagio Casino for $950 million from the privately held BREIT

VICI Properties (VICI) is spending $1.3 billion to acquire the remaining 49.9% stake in MGM Grand and Mandalay Bay from BREIT

Prologis (PLD) is acquiring a $3.1 billion industrial portfolio from Blackstone

Public Storage (PSA) is acquiring Simply Self Storage from BREIT for $2.2 billion

Ryman Hospitality Properties (RHP) acquiring the JW Marriott San Antonio Country Resort & Spa from BREIT for $800 million.

YoY FFO (Funds From Operations) is up over 10%.

NOI (Net Operating Income) is up 6.8%, and same-store NOI is up 6.5%, beating inflation as REITs always do.

Occupancy rates increased to 93.6%.

Balance sheets are on the stronger side, with an average leverage ratio of 34%

Predominantly fixed-rate debt with an average weighted term to maturity of about seven years, sufficient to ride out this rate cycle and refinance at attractive rates.

The weighted average cost of capital is now at 3.7%.

“So, on one hand, REITs are not immune to uptick in rates. But over that same period, the cost of capital started at 3.3% and ended at 3.7%. Meanwhile, you have the 10-year Treasury at 4.0%. It’s attractive debt and they are well positioned to handle what this rate cycle has to hand out.” – Edward F. Pierzak, Nareit senior vice president of research.

RQI Fact Sheet – Sept. 30

Author’s Calculations

Pick #2: USA – Yield 9.8%

FOMO (Fear Of Missing Out): As investors, it is normal to seek exceptional success stories like Amazon (AMZN), but it is critical to understand that these are relatively rare compared to a multitude of less successful ventures. For every Amazon, there were a hundred WeWorks that looked equally promising and lucrative. The business world is challenging and complex, and several face irrecoverable setbacks and failures. And the amount of information you have access to about the company, as an average investor, is quite limited. Hence, it is prudent to diversify to protect ourselves from the unknown.

The dilemma between investing for long-term growth and current income through dividends. After all, if quality companies are bought and held for decades, they could turn out to be multi-baggers. It is easier said than done, as there are several hurdles:

Can you realistically buy and hold without selling anything through market gyrations?

If your holding doubles or triples in value and then crashes 50%, would you be emotionally sound to hold on to your investment?

What if your cash needs coincide with the market crash?

The prospects of running out of shares to sell to generate cash flow.


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