Everyone talks about the skyrocketing oil stocks, but when I look at my own industry chart, I see that real estate is currently the most popular sector of the stock market.
If you want to see my diagram please visit bit.ly/Harrys_Hot_Sectors, select the histogram display and the “Last three months” time interval.
Instead of buying entire office buildings or apartment complexes, you can get involved in the real estate sector by buying real estate investment funds or REITs.
Real estate investment funds are divided into two categories: 1) real estate investment funds that own commercial real estate such as shopping centers, residential complexes, industrial parks, etc., and 2) finance real estate investment funds that hold mortgage loans secured by real estate … …
Although they trade in a similar way to common stocks, real estate investment funds are a special type of corporation. They do not pay federal income tax if they distribute at least 90% of their taxable income to shareholders.
This is why many real estate investment funds pay high dividends, often equal to 4-6% annual return. Dividends from real estate investment funds are generally taxed as ordinary income instead of the lower capital gains rate of 15% or 20%. Therefore, it is best to keep real estate investment funds in tax-protected accounts.
Screen from FinvizR
I used the free stock verification program available at finviz.com to determine which real estate investment funds to consider. Here’s what you need to know to launch your own screen.
Start by selecting “Screener” on the Finviz homepage (finviz.com). Finviz uses “filters” to define selection criteria. You can see the available filters by clicking “All” in the filter bar. Then use the dropdown menu associated with each filter you want to use to specify the selection values.
Define the search universe
Start by selecting “US” using the country filter, then select “Real estate” using the industry filter and “Over 3%” using the dividend yield filter to restrict your list to high dividend real estate stocks based on the United States.
Institutional players such as mutual funds and insurance companies employ teams of analysts to find the best stocks in any category. So instead of doing the analysis yourself, select Over 40% for Institutional Ownership to limit your list to real estate investment funds that smart money likes.
Likewise, stock analysts get big bucks for spending their days analyzing stocks. So, select Strong Buy using the Analyst Recommendations filter to determine the stocks they like the most.
Trend is your friend
Finally, specify “Quarter Up” using the performance filter to limit your list to stocks that are already trending upward.
Three real estate investment funds and two real estate mortgage investment funds were found on my screen. To minimize your risk, instead of trying to figure out the smallest details, consider buying equal dollar amounts of each real estate investment fund.
• Alpine Income Property Trust (ticker PINE): owns and operates commercial property for rent per tenant. Pays a dividend yield of 5.0%.
• Global Medical REIT (GMRE): rents out specialized medical facilities that are rented out to groups of doctors. Pays a yield of 5.6%.
• New Residential Investment (NRZ): provides and invests in loans secured by residential real estate. Pays a yield of 7.5%.
• NexPoint Real Estate Finance (NREF): invests in secured commercial real estate loans. Pays 9.5%.
• Postal Realty Trust (PSTL): owns and operates over 1,000 real estate properties that it leases to the US Postal Service. Pays 4.3%.
As always, these are my ideas. You have your due diligence. The more you know about your promotions, the better your results.
Harry Domash from Aptos publishes the Winning Investing and Dividend Detective websites. Contact him at www.winninginvesting.com or Santa Cruz Sentinel, 324 Encinal St., Santa Cruz, CA 95060. To see previous Domash columns, visit santacruzsentinel.com/topic/Harry_Domash.