Tuesday, December 31, 2013

REIT's To Buy or Not To Buy This Year

I, like many investors, were drawn toward REIT's due to the high dividends and rather constant charts until recently but the question is did the REIT bubble pop or will we see recovery in the coming year.  REIT's, for those of you who aren't familiar, are real estate investment trusts. They invest in real estate and/or mortgages, have special tax breaks, and usually pay out a considerable portion of their profit as dividends to the stock holders.  I have a few in my portfolio, MFA, NLY, ARR, and at one time WAC which I sold after they were no longer classified as an REIT.

So far the dividends that I have received have covered the recent loss in value.  So what does the future hold for these high dividend stocks?  I believe that given the recent drop in price now would be a great time to buy.  I think the economy is headed upward in 2014 which will bring even more stability to a still recovering housing market.

With the dividend percentage being as high as it is on these particular stocks it gives you a little more cushion when the value takes a dip.  As of today, ARR is paying over 15%, NLY is just over 12%, and MFA is over 11%.  At these rates, even if the REIT market holds steady (which it should), you are still making well over 10% a year.  Add into that the probability of an increase in value it's a no brainer for me.  Even in the off chance it does drop in value, it would have to completely plummet to reach the pitiful rates that CD's and money markets are paying out.  If you are going to invest in CD's you might as well hide your money under your mattress, but that's another topic.

In closing, I believe if you do your research and chose a reliable REIT you won't go wrong this year.  So buy, buy ,buy on REIT's in early 2014.


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