Never heard of a REIT? Short for real estate investment trust, a REIT trades much like a stock and directly invests in real estate. Yields are generally higher than most equities because a REIT returns a large portion of its profits back to its shareholders.
Here are a few REITs to consider. Remember that these aren’t buy recommendations; use these as starting points for further research.
Vanguard REIT ETF (NYSE: VNQ)
For investors that want a more diversified approach to REIT investing, this Vanguard ETF is worth consideration. The fund invests in the MSCI US REIT Index which tracks the performance of a variety of REIT with its largest holding being the well-known Simon Property Group.
The expense ratio is only 0.10 percent and yields 2.77 percent.
American Realty Capital Properties, Inc. (NASDAQ: ARCP)
With an enterprise value of $21.5 billion, American Reality is the largest net lease REIT in the country. The company now owns more than 3,700 properties in 49 states. The REIT pays an impressive 7.2 percent dividend and after spending March in a downtrend, investors see some room to the upside.
BioMed Realty Trust Inc. (NYSE: BMR)
BioMed is the landlord of some of the biggest biotech and pharmaceutical companies as well as government agencies in the research field. It sports a healthy five percent dividend yield and is up nearly 12 percent in 2014.
Extra Space Storage (NYSE: EXR)
The public storage industry continues to be a hot investment and the REITs focusing on these facilities have made shareholders a lot of money. Extra Space Storage has returned nearly 25 percent in the past year and for new buyers, offers a 3.3 percent yield.
But be careful. An increasing amount of investors are calling the public storage industry overvalued. A correction may be on the horizon.
Senior Housing Properties Trust (NYSE: SNH)
This REIT owns and manages nursing homes, hospitals, senior apartments, and independent and assist living centers. The REIT has lost about 16 percent over the past year but is up around 1.5 percent for 2014. Healthcare-related positions are often overlooked in bull markets but with an impressive seven percent yield, this may be an attractive investment at these levels.
Before investing in a REIT, make sure you understand how they work, how your investment is taxed, and the risks involved. Although they function much like stocks, they’re completely levered to the real estate market, which, as investors have seen over the years, can be highly volatile.
Disclosure: At the time of this writing, Tim Parker was long Extra Space Storage.
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