2023-04-07 05:47:21 ET
Investors looking at real estate investment trusts (REITs) need to consider the portfolio of properties that underpin the business. Diversification is important. And yet, sometimes, picking the wrong sectors can have a material and negative impact on a REIT's performance. Gladstone Commercial (NASDAQ: GOOD) is a good example of this. And despite a huge 9% yield and monthly pay dividend, most investors will probably want to avoid this REIT for now.
From a high-level perspective, Gladstone Commercial had a well-thought-out business approach. It uses the net lease model, which means that it leases individual properties to a single tenant that is largely responsible for the asset's operating costs. That helps to protect the REIT from inflation in things like maintenance and taxes. Across a large enough portfolio, the risk of any single property (which is high because of the single tenant) is materially reduced. Only Gladstone Commercial has a relatively modest portfolio of about 137 properties.
Image source: Getty Images.
For further details see:
Empty Offices Tanked This REIT's Dividend in 2022 -- Now It's Focusing on Industrial Properties