Posted: 8/24/2011 4:52:14 AM EDT
| I have been looking at these for a while because they pay a huge dividend. Most seem to be profitable. What's the catch? It seems to good to be true. |
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I have been looking at these for a while because they pay a huge dividend. Most seem to be profitable. What's the catch? It seems to good to be true. Look at HCN(health care REIT). I have some of their common and preferred stock. I also recommend the book "REIT: Cash is King" by Simon Wadsworth. In it, he tells how to generate a steady income stream from REIT preferred stock. Basically, he says the rating agencies don't know a lot about the structure of REIT's, leading them to have worse credit ratings than they should have in realilty. This, in turn, keeps alot of investors away and prices suppressed. They pay high dividends to try to attract investors. |
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After living with a guy who ran some REITs I feel like it is assets that are to risky for a company to privately owned if the REIT is ran by a private company. More risky = grater rewards; thus the higher dividend.
I own them myself, but you don't know for instance if it a real estate REIT if the managers are inflating the # or if it is an energy REIT if they are inflating the reserves. Over all I like them to be part of a portfolio not my entire portfolio. mlm |
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AGNC and NLY are the kings of mReits with good management and a steady div payout. What you want are agency backed reits (AGNC/NLY), lower risk then IVR (hybrid reit).
14-20% divs go a long way to hedging any losses from your other stocks. Keep in mind, the best time to buy a mReit is after they pay their div, unless you get a great buying opportunity where the market went full retard over an obama refinance rumor, which frankly won't kill mreits, but might lower their yield 4-5%...even then, this "dooms day scenario" isn't that bad considering you'll still be netting 10%! People that are "in the know" in the mReit game and trade AGNC have the phrase (BATSAT)...BUy at $28 and sell at $30. That gives you a good gauge as to when a good buying opportunity is. By the way, AGNC's/NLY's next div should be sometime around Sep. so buying it now, would be buying it "pre dividend run up" which is a great way to make a quick buck. Good luck and go to the Yahoo message board for AGNC/NLY if you want to know any current goings on in the mReit world. 
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A REIT is a tax vehicle used to avoid paying corporate taxes. To gain this tax status there are a number of requirements with one of the main ones being they have to distribute 90% of there income to the stockholders in the form of a dividend. REITS have to generate 95% of there income from dividends, interest and property income (rents) and 75% of the invested assets must be in real estate. As long as the company is managing the portfolio properly, a high yield can indicate a low price stock. Real estate is still depressed, but if rents are maintained they still have to distribute the dividends, so yields can stay higher unless rents reset to lower levels. Are they a good investment? Yes they can be. I would stick to higher quality names and read up on
REITs before investing. Healthcare REIT ( referenced above by in another post) is a high quality name that has pulled back due to Medicare reimbursement cuts, which could hurt the ability of their renters to pay. So you need to understand how the cash flows are generated for each type of REIT to know where the risks lie. Good luck. Chris |
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Mortgage REITs do indeed pay a nice dividend. They typically leverage their portfolios, and have to distribute 90% to keep their REIT status.
There is risk. If interest rates rise, their borrowing costs go up. They basically lend long, and borrow short. Not too different from your friendly neighborhood bank. Friday, most of the M-REITs dropped. Seems like the Obama administration thinks they should be under the requirements of the Investment Company act of 1940. This would eliminaate their ability to leverage their portfolios. I have no way of knowing how this will turn out, but if they don't get their way, it makes for a great buyiing opportunity. Helicopter Ben says he will keep short term rates low for another couple of years. This would be a good environment for M-REITs. I own NLY myself, and consider it to be the cream of the crop. |