What some have referred to as a "taper tantrum" -- a pullback in higher-yielding assets that thrive on record-low rates -- has subsequently led to a more robust environment for collecting dividends.
Real estate investments trusts are one such asset class that has been hit hard, and the selling pressure doesn't match the risks of a rising interest rate environment,- particularly for those REITs with low leverage, termed-out debt structures and visible growth.
As we have seen, REIT exchange-traded funds sold out of the larger, more liquid names across the board with no regard for the strong REIT fundamentals, and hedge funds have since piled on with short positions (i.e. Digital Realty
But hold on a minute.
However, income investors should begin to examine REITs for their juicy dividends and, thanks to Mr. Market, we are now seeing some very attractive entry points (with a wider "margin of safety"). For REIT investors, obtaining a dividend is not just icing on the cake since for most REITs, the dividend represents a substantial (average around 60%) ingredient for a REIT's total return. Although share price appreciation is nice, the most important attribute for REIT investors are high and growing dividends.
In fact, REIT dividends remain a key differentiator for performance and over the next few years it will be crucial to own stocks (like REITs) that can deliver consistent growth. Simply put, we are now approaching an excellent buying opportunity for REITs and they should be a "core" component for your overall income strategy.
The REITs That Pay Monthly
Several REITs recently announced a "monthly pay model." I find that especially attractive for income investors. Why? Because by investing in REITs that pay monthly you're able to better match fund your living expenses and create a more disciplined approach to saving and investing. If you're like me, I like receiving monthly rewards as that provides me with the flexibility of paying a household bill, enjoy a round of golf, or simply putting my money back to work -- like owning a free share machine.
Inland Real Estate Corp.
American Realty Capital Properties
Ben Butcher, CEO of STAG, recently commented on the new dividend policy: "We make this change principally in recognition that these dividends belong to our shareholders and should be delivered to them sooner rather than later."
Finally, Chambers Street Group
Since the public listing on May 21, Chambers Street shares have declined by 24% (from $10 to $7.57) while the dividend yield has climbed from 5% to a whopping 6.61%. Chambers Street looks like a bargain at $7.57. I really like the thoughts of getting a juicy 6.61% dividend each month.
So no matter how you stack'em up (monthly or quarterly), REIT dividends should be on your radar screen. Turn your fear of rising rates into opportunity for income. After all, compounding works while you sleep and that's just another reason why REITs help me to sleep well at night.
Courtesy of SNL Financial
At the time of publication the author had a position in O.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.
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