Real estate investment trusts – or REITs, for short – can be fantastic securities for generating portfolio income.
That’s because REITs widely offer higher dividend yields than the average stock.
- The S&P 500 ETF (SPY) has a dividend yield of 1.2%
- The Vanguard Real Estate ETF (VNQ) has a dividend yield of 2.2%
While the 2.2% yield for VNQ is significantly higher than the S&P 500’s current dividend yield, it hides the fact that there are many quality, truly high yielding REITs available even in today’s low yield environment.
And that’s where we focus. We aren’t interested in the ‘average’ REIT. We want you to invest in the best REITs available now for income, total returns, and safety.
But more on that later in this report…
To understand the opportunity REITs offer, it helps to understand the unique legal structure of REITs and how it helps income investors.
The Unique Legal Structure Of REITs
REITs are required by law to pay out at least 90% of their net income as dividend payments to their unitholders.
Note: REITs trade as units, not shares.
When an organization elects to become a REIT, they avoid the ‘double taxation’ of corporations (tax on both income and dividends) in exchange for being required to distribute the bulk of earnings as dividends.
As the name ‘Real Estate Investment Trust’ implies, REITs are legally required to generate at least 75% of their income from real estate related sources. Therefore, when you invest in a REIT, you are investing in real estate itself in some form.
The unique legal structure of REITs make them a compelling way to get diversified real estate exposure and passive income.
Real Estate Has Proven Itself Over The Long Run
It’s hard to think of an industry that is more likely to be around 100 or even 1,000 years from now than real estate. The space on earth is limited – there’s no way around it.
At the same time, both global population and global wealth is rising. This provides a long-term tailwind for global real estate prices.
Countries have been fighting wars for land (real estate) throughout history. It’s almost impossible to envision land no longer having value.
This makes real estate perhaps the least likely industry to be made obsolete through advancing technology.
You may be thinking ‘what about the end of retail, online shopping, and Amazon (AMZN)’?
Aspects of real estate do change over time. Malls may go in and out of fashion. Cities and suburbs grow, and sometimes shrink. But real estate as a whole is unlikely to ever ‘go out of style’.
The COVID-19 lock downs are another temporary detractor for real estate. More people in their places of living means less people going out to shop, eat, and be entertained. This is negative for certain segments of the real estate industry.
But this too, is temporary. Lock downs will not be a permanent impediment to real estate.
The intrinsic value in land and long-term wealth creation and population growth make it likely that the value of real estate as a whole will increase over time.
Managing trends, threats, and opportunities within the real estate industry comes down to an individual REITs’ management team.
REITS Give You Access To Scale, Diversification, & Management Expertise
Quality REIT management teams add value through their expertise by finding real estate investments with better risk adjusted returns. This is reflected in the long-term performance of a specific REIT.
Investing in REITs means getting access to the trust’s management team and capabilities. REITs can leverage themselves and issue new units to take advantage of real estate investment opportunities.
Note: Issuing units dilutes current REIT investors. But if the funds from unit issuance are invested in projects with higher returns than the average REIT portfolio, unit holders are better off.
Which opportunities a REIT’s management team chooses to invest can have a tremendous impact on performance. But REITs don’t typically hold just one property…
REITs offer scale and diversification benefits. When you invest in a REIT, you don’t invest in just one property. REITs tend to hold many properties.
‘Stuff happens’… There is serious concentration risk to owning just one stand-alone real estate investment. But a diversified real estate portfolio minimizes property specific risks. Investing in even one REIT provides far more diversification than investing in a stand-alone real estate investment.
You aren’t limited to investing in just one REIT… But it matters which REITs you choose to build your income portfolio with.
What REITs To Invest In, And When?
REITs on average are a compelling way to get diversified real estate exposure and passive income.
But we want you to invest in better than the ‘average’ REIT…
Finding the best REITs for our members is why we created our new Top 10 REITs service.
Our Top 10 REITs special service finds and analyzes our Top 10 favorite REITs each month.
We do a tremendous amount of work to find the Top 10 REITs each months. Keep reading to learn how we do the rankings for our Top 10 REITs special service.
Here’s how we do it…
Our ranking procedure starts with data from The Sure Analysis Research Database.
We create quarterly research reports on 700+ income securities – including 110+ REITs – in The Sure Analysis Research Database.
Note: We will continue to add more securities (including more REITs) to Sure Analysis going forward.
We calculate metrics that matter for the securities in Sure Analysis, including 5 year forward expected total returns.
Our 5 year forward expected total returns are comprised of 5 year forward estimates for:
- Growth on a per share basis
- Valuation multiple changes
(is the security overvalued or undervalued, and by how much?)
- And of course dividend yield
The ranking procedure we use to find our 10 best REITs each month is below.
- Exclude all non-REITs.
- Exclude all international REITs.
- Filter for dividend yields of 4% or greater.
- Sort by expected total returns (the higher the better).
- Manually review each REIT for safety. The review process looks at dividend history, payout ratio, and qualitative factors.
- No more than 3 REITs in each REIT subcategory. As an example, there can be no more than 3 mortgage REITs in any one edition of the Top 10 REITs report.
New Top 10 REIT special report editions come out on the 2nd Sunday of every month.
Click the button below to start your risk-free 7 day trial now.
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Here’s what you get when you join our Top 10 REITs service:
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Note: As a newsletter provider, we can’t and won’t provide personalized investment advice.
The Sure Dividend Golden Rule Commitment is there because we care about our members’ success.
Sure Dividend helps individual investors build high quality dividend growth portfolios for the long run. Part of the way we accomplish this is through fair business terms and quality customer support.
Our Top 10 REITs service currently has a risk-free trial – pay nothing for 7 days. We are offering you this free trial because we know the value this service provides and want to reach as many people as possible.
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