Vornado Realty Trust: 7.5% From The Preferred Stocks Is Tempting

Vornado Realty Trust (VNO), a leading New York-based REIT, offers preferred shares, notably VNO.PR.O, yielding over 7%, which analysts view as a compelling risk-return proposition compared to sector peers and OTC bonds. While VNO's credit ratings are non-investment grade, they are competitive within the sector, underpinned by strong asset coverage and stable cash flows, positioning these preferreds as an attractive option for income-focused investors seeking reliable distributions and potential price upside.

Analysis

Vornado Realty Trust (VNO), a leading New York-based REIT, offers preferred shares, notably VNO.PR.O, which currently yield over 7%. This yield is highlighted as a compelling risk-return proposition when compared to both sector peers and over-the-counter bonds, suggesting a favorable entry point for investors seeking higher income. This positive assessment is supported by a 'strongly positive' sentiment score of 0.75 and a 'bullish' tone.

Despite VNO's credit ratings being non-investment grade for both the company and its preferreds, these ratings are considered competitive within the broader REIT sector. The underlying strength of Vornado's financial position is attributed to strong asset coverage and stable cash flows, which provide a buffer against potential credit risks.

The analyst specifically recommends VNO.PR.O for income-focused investors, emphasizing its capacity for reliable distributions. Furthermore, the preferred shares are identified as having potential for price upside, indicating a belief in capital appreciation in addition to consistent income generation, despite the acknowledged lower credit rating.

Key Decisions for Investors

• Consider VNO.PR.O preferred shares for income-focused portfolios given their attractive 7%+ yield and reliable distributions.
• Evaluate the non-investment grade credit rating in the context of VNO's strong asset coverage and stable cash flows, which mitigate some credit concerns.
• Monitor Vornado's fundamental performance and sector trends to assess the long-term stability and potential price upside of these preferred shares.