My favorite mall REIT is Tanger Factory Outlets ( SKT), the only "pure play" outlet REIT that has an enviable track record of paying and increasing dividends for 20 years in a row.
The Shopping Center REITs now number nineteen as Brixmor Property Group ( BRX) listed shares on the NYSE on Oct. 30. Brixmor raised over $800 million in equity by monetizing 522 shopping centers and 87 million square feet. For the year to date, the shopping center REITs have returned 11.87% and the average dividend yield for the sub-sector is 3.61%, according to NAREIT. The shopping center REITs with a combined market capitalization of around $48 billion is around half the size of the mall sector at $87 billion. Two of the best values in the shopping center sector are both San Diego-based REITs: Excel Trust ( EXL) and Retail Opportunity Investment Trust ( ROIC). Excel operates from California to Virginia and has a necessity-based strategy of renting to major retailers like Lowe's and TJ Maxx ( TJX) while ROIC focuses on the west coast and pursues a value add strategy of acquiring high-quality assets at distressed prices. The triple net REITs (also referred to as freestanding) have ballooned into a core sector that now includes companies that represent more than 21% of the FTSE NAREIT All Equity REITs Index based on equity market cap (up from 15.5% in 2010). Given the volume of capital entering the space, the triple net REITs have mushroomed in size to around $26 billion based on market cap. One of the best values today in the triple net sector is Realty Income ( O), better known and the "Monthly Dividend Company." The Escondido-based REIT has paid and increased dividends for 19 years in a row and the current share price ($38.78) is most attractive (the P/FFO multiple is 16.2x). Two other holiday picks include Chambers Street Group ( CSG) and Monmouth Real Estate ( MNR). Chambers Street should benefit from the five large box facilities that it leases to Amazon ( AMZN) and Monmouth should prosper with its roughly 50 percent concentration with major transportation company, FedEx ( FDX). Another interesting tidbit, Monmouth leases a facility in New Jersey that houses the Christmas parade for Macy's. One of the best ways for a value investor to sleep well at night is to focus on fundamentals. That means that you must ignore the drama associated with the crowd and maintain a laser-focus on earnings - or in REIT-dom we define that as funds from operations (or FFO). Most importantly, an intelligent investor should study the safety of the dividend stream and determine whether there is a buffer in price to protect against market fluctuations. Happy Holidays, and remember that I only have two requests. One is to protect your principal at all costs and the second is all I want for Christmas is a few good REITS. Good luck. At the time of publication the author had a position in ARCP, CSG, CBL and O. Follow @swan_investor This article was written by an independent contributor, separate from TheStreet's regular news coverage.