Should You Own REITs?

 
Wealthy Retirement

SPONSORED

Stock Legend Says to Buy These Three Ultra-Cheap Stocks Now

Stocks are suddenly available at their cheapest prices in years. Some are trading for 40%... 60%... even 75% off.

But he says three in particular are must-buys. Find out the details that will make your retirement here.

Editor's Note: Today, Chief Income Strategist Marc Lichtenfeld will shine a light on one of dividend investing's highest-yielding opportunities: real estate investment trusts (REITs).

These special investments offer investors a way to play the real estate market - and generate mouthwatering double-digit yields - without the risk and responsibility of a rental purchase.

In some cases, these companies are an income investor's best friend. That's why Marc recommends them to readers of his Oxford Income Letter.

For access to his best ideas from REITs (and a score of other companies presenting the highest safe yields on the market), click here and become a subscriber.

- Mable Buchanan, Assistant Managing Editor

Should You Own REITs?

Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Marc Lichtenfeld

I've been getting a lot of emails about REITs lately. These are companies that own various forms of real estate and by law must pay out 90% of their profits in dividends.

As a result, the dividend yields on REITs are higher than the yields on most stocks.

REITs typically invest in a specific area in real estate. You can find REITs that are focused on shopping malls, apartments, student housing, cellphone towers, data centers, senior care facilities, private prisons, industrial properties, self-storage, mortgages and more.

Together, REITs own $3 trillion worth of real estate in the U.S.

They each have benefits and challenges specific to their industry. For example, changes to Medicare can have a big effect on senior care REITs. The COVID-19 pandemic impacts retailers' ability to pay rent to mall REITs.

It's certainly understandable that REITs have underperformed the market since the pandemic-caused sell-off.

Since the market high on February 19, the S&P 500 is down 10%, but the Vanguard Real Estate ETF (NYSE: VNQ), the largest real estate exchange-traded fund (ETF), is down twice as much.

Chart -
 

Despite REITs' recent underperformance, investors salivate at some of the high yields they offer.

In this tricky environment, I prefer REITs that are more or less recession-proof - companies like Omega Healthcare Investors (NYSE: OHI), whose tenants are operators of assisted living facilities.

It's important to note that Omega doesn't run the nursing homes, but if the owner of the business wants to stay in business, it needs to pay its rent to Omega. The stock yields 8.7%.

SPONSORED

The Time to Invest in 5G Is NOW

Happy Woman Holding PhoneAT&T has just become the first carrier to offer 5G coverage.

Sprint's 5G network is live in Phoenix, New York City, Washington, D.C., and Los Angeles.

T-Mobile has flipped the 5G switch in six cities...

And Verizon has launched its 5G network in 13 cities.

Nearly a decade in the making, 5G is finally here...

And just ONE stock is your No. 1 chance to profit from the 5G revolution.

Details here...

Digital Realty Trust (NYSE: DLR) is a stock I've liked for a long time. It operates data centers.

Giant companies like IBM (NYSE: IBM) and Facebook (Nasdaq: FB) rent shelf space in the company's data centers, which provide security, cooling systems and other technology needed to keep the customers' servers running. The stock yields 3.3%.

Mortgage REITs are very popular with investors because of the sky-high yields they provide.

Annaly Capital Management (NYSE: NLY) yields nearly 16%, while AGNC Investment Corp. (Nasdaq: AGNC) yields more than 11% despite recently cutting its dividend.

In some ways, mortgage REITs are a bargain, trading below their book value (what the company would be worth if it were liquidated) with double-digit yields.

But there's a good reason they're so cheap. Mortgage REITs borrow money short term and lend it out long term. With yields so low, it's harder for them to make money.

There is also fear that the pandemic is causing people to skip their mortgage payments. So if you're investing in mortgage REITs, be careful and do your homework.

There are 157 publicly traded REITs. There are also privately held REITs that are sometimes offered by financial advisors. Run, don't walk, away from those. Most turn out to be terrible investments.

They are not liquid, meaning you can't get out of them easily anytime you want, and they are not often transparent. You may not know the value of your investment except at certain times of the year when the REIT issues a report.

With a publicly traded REIT, you know the value of your investment at every second and can get in or out anytime you want. So stick with the publicly traded REITs.

REITs should be a part of any balanced portfolio. Wealthy Retirement's publisher, The Oxford Club, recommends that 5% of your portfolio be invested in real estate, and REITs are an inexpensive and easy way to accomplish that.

And you'll likely generate some additional income along the way.

Good investing,

Marc

P.S. It's a commonly known fact that investing in real estate can be a direct route to a wealthy retirement. But still, the market intimidates many investors.

I take the stress out of investing in this rewarding sector for my Oxford Income Letter readers. I find the companies that present the best yields and the lowest risk to help them generate income on a set timeline.

I'd like to do the same for you and help you build the wealthy retirement you deserve, on your terms. To learn more, click here.

SPONSORED

[URGENT] The BEST Step to Take Right Now?
Coronavirus Headlines One critical natural factor may be the best defense we have right now. But for it to work at its best, you need to give it the right support.

That's why you need to know about the "Perfect Drink ."

If you have these three natural ingredients in your kitchen, you can make it right now.

See all the details HERE.

No comments:

Post a Comment