Monday, June 14, 2010

Top Yielding Real Estate Investment Trusts

I personally believe that the real estate market has bottomed out, but it may a couple years before prices start to move up. It doesn't necessarily mean that you should go out an buy a rental house, but there are other ways you can invest in real estate.

One of the best ways of speculating on real estate is through the use of Real Estate Investment Trusts, more commonly known as REITs. These investments pass through almost all their income to avoid double taxation, which is what most regular corporations are subject to. The REITs have several advantages over owning real estate directly.

First, REITs are liquid. If you need to get your money out, you can sell it and get your money in two days. Second, you can receive a decent income through dividends. Third, dividends can be received quarterly or even monthly for some REITs, just like rental income checks. Fourth, you don't have to worry about making sure the insurance, property tax, and other expenses are paid. Fifth, you won't get a call at two o'clock in the morning about a leaking toilet. And last but not least, you don't have to deal with evictions.

Although there are hundreds of REITs to choose from, you need to be cautious about which one you choose, especially the debt level. In terms of specialties, you can choose REITs that invest in apartment, commercial, industrial, government building, medical buildings, mortgages, and many other sub-categories. has just come up with a list of 15 of the highest yielding Real Estate Investment Trusts, none of which have debt to capital ratios more than 25%. As a matter of fact, three of them are debt free. Yields range from 3.3% to over 20%, but I would recommend avoiding any REITS yielding above 7% as I don't believe those high yields are sustainable.

One example, is National Health Investors Inc. (NHI) which pays a decent yield of 5.7% and has a debt to capital ratio of only 7.21%. The REIT invests in health care properties, mainly those involved in the long-term care industry. The company has been paid quarterly dividends since 1992, The total dividend payout is $63.64 million on an operating income of $72.96 million. The company showed an earnings growth for the latest quarter of 5.9%.

Another high yield REIT is LTC Properties, Inc. (LTC) which sports a yield of 6.25% and carries a low debt to capital ratio of 7.94%. This is another long-term care real estate investment trust. This is a REIT that pays monthly dividends, and the dividend track record dates back to 1992 also.

Public Storage (PSA) offers a yield of 3.51%, and has a debt to equity ratio of 5.53%. This REIT has a different approach to the REITs described above, as it owns and operates self-storage facilities in the United States and Europe. The company has a long track record, with monthly dividends paid since 1988.

To see the entire list of high yield REITs, go to

Author does not own any of the above.


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