For many market observers, the emergence and growth of e-commerce has been nothing short of extraordinary. The challenge for conservative investors, however, is finding a stock that is reasonably valued, as many emerging names trade at very high multiples. As an example, shares of Amazon.com, Inc. (NASDAQ: AMZN), which have increased by more than 50% over the past year, trade at an exorbitant multiple of almost 300 times earnings. No conservative investor would ever buy this type of security at this price.
For those still looking to benefit from this relatively new sector, however, there are a few key ways to position your portfolios. One of the lowest-risk Canadian gems available to investors is the company Pure Industrial Real Estate Trust (TSX:AAR.UN), called PIRET for short. It is a REIT that focuses on industrial real estate. Since 2013, the company has paid a consistent monthly dividend of $0.026 per share, while the payout ratio has steadily declined, as the company has successfully increased rents and benefited from lower interest rates in each passing year.
The reason that investors in this company are still benefiting from the boom in online shopping is due to its biggest customer, FedEx Corporation (NYSE: FDX), which accounts for close 25% of PIRET’s revenues. To make things even more interesting, PIRET, which previously operated in Canada, has only recently expanded into the United States to serve its biggest client and, along the way, take on several new ones.
Although industrial real estate has traditionally been one of the underappreciated parts of the real estate market, investors have not hesitated to bid shares higher over the past year. During 2017, shares are up by approximately 17% in addition to a dividend yield of no less than 4.75%.
FedEx Corporation and United Parcel Service, Inc. (NYSE: UPS) are both delivering significantly more packages than ever before. As consumers continue to increase their online shopping habits, these companies are in prime positions to benefit from this shift. To boot, it has become clear that we will see either self-driving vehicles or drones that can deliver directly to the door. Although consumers will undoubtedly benefit from this cost savings, it is highly unlikely that the delivery companies will pass on 100% of the savings, saving at least a portion of it for themselves.
The wonderful thing about the stock market is the opportunity for everyone to find something of interest. Although many younger investors will shy away from the lower-risk dividend-paying stocks, it does not mean that they are not extremely attractive, as earnings and dividends continue to increase, and, in many cases, the companies undergo a share-buyback program, which leads to fewer shares outstanding and potentially a higher increase in dividend payments down the road. Until full maturity, however, these traditional businesses may be the ones offering investors the most bang for their buck!
