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Is This the Right Time for REITs

I have generally not been a big backer of REITs over the years for a variety of reasons, including complex taxes, high payout ratios and their dependence on real estate markets, notes Chuck Carlson, dividend expert and editor of DRIP Investor.

Still, I’m finding myself drawn to REITs at this time. One reason is that the interest-rate environment seems  conducive for REITs. REITs tend to be sensitive to interest rates.

Thus, a relatively flat interest-rate environment should work well for the group. Also, REITs as a group have not exactly been big gainers over the last couple of years and seem due for a snap-back year.

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Finally, I think the market environment may get a little rocky in the near term, in which case REITs should see some support from investors searching for calmer waters.

Physicians Realty Trust (DOC) is a self-managed real estate company organized to acquire, develop, own, and manage healthcare properties that are leased to physicians, hospitals, and healthcare-delivery systems.

Healthcare real estate is likely to  remain in demand given the aging of America and the need for greater access to health-care facilities. Yielding 4.9%, Physicians Realty has been performing well recently and offers a nice play in the REIT sector.

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Among retailing REITs, Brixmor Property Group (BRX) has appeal. Brixmor owns and operates a national portfolio of open-air shopping centers. Its 425 retail centers comprise approximately 74 million square feet of prime retail space.

The company is a real estate partner to more than 5,000 retailers, including TJX Companies, Kroger, Publix Super Markets, Wal-Mart, Ross Stores, and L.A. Fitness. Yielding 6.2%, the stock should be one of the better REIT performers this year.

If investors want a simple way to diversify across a variety of REITs, the Vanguard Real Estate (VNQ) exchange-traded fund offers an inexpensive way to own a basket of REITs and real-estate-related securities. Note that the ETF does not offer a direct-purchase plan; purchases must be made via a broker.

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