This is not a new investment opportunity as it has been around for a long time now. The problem is if you are not into investing and do not read investing books, you probably never heard of this type of investment opportunity. What is a real estate investment trust? Exactly what you might think it is when you read the title. They are companies that invest in real estate holdings, offer shares to investors so that they can own a piece of the pie. This in turn provides the company with the influx of cash to invest into more properties. Now the secret sauce to this deal is that by law these REITS must pay out about 90% of all the income they make back to shareholders. If they make 1 million dollars a year they have to pay out 900K to all the owners. Usually all the dividends are paid out on a monthly time schedule. Now what company you know gives almost all of its profits back to the owners? (None I’ve seen)
I am a big proponent in holding some REITS long-term, as it can provide a substantial amount of income and the ability to diversify nest egg money away from the usual U.S. large cap equities. The REIT market on average provides yields of about 5% and this is not including any capital appreciation on the price of the stock when you decide to sell. For a few examples of REITS in the market today see below:
Real Estate Investment Trusts in the Market:
|Symbol||Price||Yield||Mnthly / Qrtly Dividend||Time in Business|
|O||45||4.83%||.1828 Mnthly||44 Years|
|GOV||24||7.17%||.43 Qrtly||5 Years|
This investment lets you have exposure to real estate without ever actually owning a piece of land. The REITS trade like individual stocks and are very liquid investment vehicles. In addition to buying these REITS in your brokerage account you can also look for REIT mutual / index funds offered by the big investment companies like Fidelity and Vanguard. These are a bit different as they pay out on a quarterly basis, in addition to this they have policies governed by the mutual fund company.
As you notice the REITS that have been around for over 20 years pay out much less than the others on the list with less time doing business. The difference in yield is about 3% between the different REITS; the new comers of course come with greater risk. The grandfather of all the REITS is the one traded in the symbol O, and they are on track to consistently pay and increase dividends by 50 years. Do you really understand the safety and security of such a business? They will do everything not to miss a payment to their shareholders and for Pete’s sake to avoid bankruptcy. (The worse scenario for a stock holder)
If you need to find out what your income will be if you were to invest 5 thousand dollars into each REIT, just divide 5000 by the share price, then multiply the # of shares times the dividend amount in the chart above. This will provide you with the dividend you will get either per quarter or per month.
Begin investing in a REIT today through —TradeKing.com
Like REITS, MLP offer a different investing option.
Comment if you hold any REITS in your portfolio?
Do you recommend another Real estate investment trust not listed above that you can share for the moneywatch101 readers?