REITs are on sale again. Last week’s better-than-expected jobs report sent bond yields soaring and caused the prices of anything that “looks” like a bond — such as conservative REITs, real estate equities that typically throw off huge dividends — to drop like a rock.
We’ve seen this show before, and we already know how it ends. It appears that we’ve fallen into a repeating cycle:
- Fed announces that quantitative easing will continue indefinitely, so long as the employment picture is weak.
- Yields fall and the prices of income investments drift higher.
- A positive blip of economic data causes investors to panic, fearing that tapering is imminent.
- Yields soar and the prices of income investments plummet.
- Fed clarifies that economy is still weak … and reiterates step one.
I don’t want to get into the game of Fed handicapping because, as we’ve seen over the past six months, the Fed seems to have a real talent for doing the unexpected. Will the Fed actually deviate from the cycle and taper this year? Maybe. Maybe not. I’m not sure if even Chairman Bernanke or Janet Yellen know the answer to that question at this point.
Regardless, my income strategy is the same. I am opportunistically picking up shares of REITs that are raising their dividends whenever I see a selloff.
Here are three favorites, including a couple held in Sizemore Capital client accounts: