5 Best REITs to Buy [Real Estate Investment Trust] | Summary and Q&A

TL;DR

Learn how to choose the best real estate investment trust (REIT) stocks, the risks of high dividend-yielding mortgage REITs, and why retail property REITs may not be a good investment. Discover the top five REIT stocks for 2020.

Key Insights

• 🧡 There are over 640 REITs available on US exchanges, providing investors with a wide range of options.
• ☠️ Mortgage REITs offer high dividend yields but come with risks due to leverage and interest rate sensitivity.
• 🛍️ Retail property REITs have struggled due to the growth of online shopping and the decline of traditional retail.
• 💄 REITs have historically outperformed stocks, making them a valuable addition to a diversified portfolio.
• 🧘 Crown Castle International (CCI) is a leader in connectivity and is well-positioned for the increasing demand for cell towers and fiber cable.
• 🙃 Duke Realty (DRE) benefits from the growth of e-commerce sales as it owns industrial warehouse and logistics properties.
• 🙂 Realty Income (O) is a popular monthly dividend payer with a diversified portfolio of properties, although it may be slightly expensive.
• 👋 AGNC Investment Corporation (AGNC) is a good mortgage REIT pick, trading below book value and offering a high dividend yield.

Transcript

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Questions & Answers

Q: What is a REIT and why are they attractive for investors?

A REIT is a special type of company that owns real estate and provides investors with a tax break. They offer an efficient way to manage properties and allow regular investors to diversify their portfolios.

Q: What are the risks associated with mortgage REITs?

Mortgage REITs invest in real estate mortgages instead of physical properties. They use high leverage and are sensitive to interest rate changes, which can lead to volatility. Additionally, a flattened yield curve reduces their profitability.

Q: Why should investors be cautious about retail property REITs?

The rise of online shopping and the struggling retail sector have negatively impacted retail property REITs. With increased bankruptcies and store closures, these REITs have become a value trap and may not provide good returns in the future.

Q: How have REITs performed compared to stocks historically?

Over the past 30 years, REITs have delivered an annualized total return of 10%, outperforming the 7% return of stocks. Lower interest rates have helped boost REIT prices, and their high dividend yields attract investors seeking cash flow.

Summary & Key Takeaways

• REITs are a great way to diversify your portfolio and invest in real estate without the hassle of direct property ownership.

• Mortgage REITs can be risky due to high leverage and volatility tied to interest rates.

• Retail property REITs may not be a good investment due to the growth of online shopping and the struggling retail sector.

• Despite some risks, REITs have historically outperformed stocks, providing steady cash flows and capital gains.