After yesterday’s quarter-point interest rate cut, the Fed’s benchmark interest rate is down to 1.5%. Bond yields have completely tanked since the beginning of ’19, and some investors are desperately searching for better-yielding, low-risk assets. Many investors are looking to REIT stocks to compensate for lower bond yields.
REITs: High-Yield, Low-Risk
In an low-rate environment, real-estate investment trusts (REITs) start to look attractive. REITs trade on the open stock market, so there are few barriers for traders who want to start investing. These assets offer some of the highest yields on the market, with many paying out over 5%. Most REITs center around a particular category of real estate.
Since these companies get most of their earnings from rent payments, their businesses tend to be remarkably stable. However, don’t underestimate how much REITs can fluctuate. While these assets tend to be less volatile than traditional stocks, prices can still move drastically over time. Once they understand the associated risks, yield-seeking investors should watch these high-yield REITs.
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American Tower Corp. (AMT)
Cell Phone Towers
American Tower Corp. was one of the hottest plays on 5G this year. This firm owns cell phone towers and other telecommunication infrastructure, and It leases its properties to providers like AT&T (T) and Verizon (VZ). This one started rallying early in the year, as traders anticipated big infrastructure spending from telecom companies building out their 5G networks.
Currently, this REIT isn’t yielding very much because its had such a good year. Share prices are up 41% over the past 52 weeks and that’s a pretty spectacular performance for a REIT.
Annual Dividend Yield: 1.75%
Prologis Inc. (PLD)
This is one of the leading warehouse REIT stocks on the market. This company owns and leases warehouse space and – in case you haven’t heard – warehouses are the hottest properties in real-estate this year. Companies are spending big to bolster their e-commerce business, and a large part of that spending is going into last-mile delivery centers near major metropolitan areas. As a result, warehouse property is in high demand, and the outlook for the future remains strong.
Growth potential is high for this stock but, as a result, yields are aren’t as high as some of the other high-yield REITs. However, this company’s growth seems pretty stable and there is a good chance that shareholders will get solid gains to go along with their dividend payments
Annual Dividend Yield: 2.42%
Simon Property Group Inc. (SPG)
Retail Space / Malls
If this name sounds familiar, you’ve probably seen it somewhere at your local mall. This company has a vast portfolio of large indoor malls across the U.S. However, the outlook for these types of properties is not great, so this stock hasn’t performed well over the past year. It’s in the midst of a long-term down that began about 12 months ago. Shares are down over 15% this year.
Smart investors don’t always go with the crowd. If you think the ‘mall massacre’ fears are overblown, you can get in this one for cheap. At the very least, the company is financially stable and pays a decent dividend.
Annual Dividend Yield: 5.56%
Host Hotels and Resorts Inc. (HST)
This company owns high-class hotels and resort properties across the U.S., along with five international properties. It leases its properties to classy hotel operators like Ritz-Carlton, St. Regis, and more. It has 83 properties across 50 major markets. Hotel REIT stocks are a popular way to play
Value investors will appreciate Host’s discounted P/E and high dividend. HST is down over 10% for the year, but earnings are projected to grow in the second quarter and the dividend yield is attractive.
Annual Dividend Yield: 4.80%
Senior Housing Property Trust (SNH)
Healthcare / Senior Housing
Healthcare REIT stocks usually center around hospitals, but Senior Housing is a specialized play on the senior housing market. The company owns medical offices, senior living communities, and wellness centers throughout the U.S. America’s baby boomers are aging and experts expect there will be a huge influx of demand for senior housing. Many real estate investors believe that senior housing will be one of the hottest corners of the market in the near future.
Despite the sunny outlook, this company has its issues. This firm is having problems turning a profit. The company posted negative earnings in two of the last three quarters, and share prices nose dived as a result of the misses. However, the declines make this REIT more attractive for long-term value investors.
Annual Dividend Yield: 6.05%
Public Storage (PSA)
Americans like to buy stuff and many are renting extra space to store their accumulated treasures. The outlook is strong for self-storage companies, and Public Storage is one of the leading companies in the industry. Demand for storage space remains strong in the U.S., especially among Millennials.
Public Storage pulled back in September, and its been trending downward ever since. It might not be the best time to pull the trigger on this one, but keep an eye on it for signs that the trend might be turning positive.
Annual Dividend Yield: 3.58%
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