There are some great deals out there in finance stocks that have been battered down along with the rest of the industry. While some companies have turned out to be disasters, there are a few diamonds in the rough.
Excellent article from smartmoney.com:
Financial Stocks for the New Year
This New Year's we're toasting banks that say "no thanks" to a bailout.
Yes, it turns out that at least a few banks in America still have some dignity left. More importantly, they have capital. Unlike their hat-in-hand peers, these banks say they're doing just fine on their own and won't be needing taxpayer dollars to get through the credit crisis.
Even more impressive, two of the eight banks on the list actually increased their earnings through the first nine months of 2008. Hudson City Bancorp (HCBK: 15.29*, -0.67, -4.19%), of Paramus, N.J., grew its net profit a whopping 47% to $321 million through the third quarter. And Honolulu-based Bank of Hawaii (BOH: 44.26*, -0.91, -2.01%) increased net profit 7% to $153 million.
"The common denominator for all of these guys is they have held up really well. Their fundamentals have done much better than the average in the industry," says Morningstar analyst Jaime Peters, who has been following the issue.
As part of its Wall Street bailout, the Treasury Department offered to spend up to $250 billion on capitalizing financial institutions. Companies had until mid-November to apply for the help.
One irony is that Wall Street giants like Citigroup (C: 6.97*, +0.26, +3.87%), which once had a market cap of more than $100 billion, really needed the government handout amid the credit crisis. Yet some small regional players such as Prosperity Bancshares (PRSP: 28.99*, -0.60, -2.02%) and Cullen/Frost Bankers (CFR: 50.02*, -0.66, -1.30%), both located in Texas, have enough capital that they're willing to turn down Uncle Sam's offer.
Friday, January 2, 2009
Thursday, December 11, 2008
"REITs battered down to eye-catching levels"
Interesting article from Globeinvestor.com
REITs battered down to eye-catching levels
ROB CARRICK
00:00 EST Saturday, December 06, 2008
Who knew REITs could go so wrong?
Long thought of as a conservative way to generate income, real estate investment trusts met the wrecking ball in 2008. The buildings they own are still standing, but their shares have been pounded.
The benchmark stock index for REITs was down 49 per cent for the year through Dec. 4, a fair bit worse than the 42-per-cent plunge by the broad S&P/TSX composite index. Established names in the sector like RioCan, Calloway and H&R are down by 40 to 70 per cent, and their yields have gone into double-digit territory.
REITs are income trusts that hold portfolios of offices, malls and big-box stores, hotels, apartments or seniors housing. REITs make regular cash distributions like other income trusts and, for much of the decade, they also rose steadily in price. REITs gained some added appeal when they were largely exempted from the new income trust tax that will take effect in 2011.
Today, REITs face challenges from both the slowing economy and the global financial crisis. But there's a sense that some have fallen to levels that make them attractive buys right now.
"Valuations are getting pretty close to a floor in my opinion," said Oscar Belaiche, manager of the Dynamic FocusPlus Real Estate Fund and a vice-president at Dynamic Funds. "I wouldn't be rushing to sell today. As a matter of fact, selectively, we're buying selected REITs. There are some good REITs that have been beaten down to levels that don't make sense to us."
Before you consider buying REITs, you have to understand the factors that drove them down in price and threaten to cause further problems looking into 2009. One of the most serious difficulties is that REITs are having trouble getting financing as a result of heightened caution among banks about lending. "It's like a boa constrictor squeezing the real estate sector," Mr. Belaiche said.
The financing problem for REITs is exemplified by what's happened recently at H&R REIT, which is developing a huge office tower project in Calgary called The Bow. EnCana Corp., Canada's largest energy company, has agreed to locate its head office in the project, and yet H&R has been having trouble securing construction loans.
H&R units are down by almost 70 per cent this year, and the yield is around 23 per cent. Investors are obviously expecting a significant drop in H&R's monthly cash distribution, although this isn't a certainty. Last month, CIBC World Markets issued a report playing up the possibility that H&R will arrange financing without having to cut its distribution.
A weak economy is another problem for REITs, and it's one with potential to get worse in a lingering recession. Retail store closings and bankruptcies are bad for retail REITs. Rising layoffs are bad for office REITs. Reduced consumer spending is bad for hotel and even seniors housing REITs.
Harry Levant, an independent income trusts analyst, said current REIT prices already seem to reflect these eventualities. "The market has really built in an ugly scenario," he said.
Part of this negative outlook is the expectation that REITs will have to cut their distributions. No income trust is immune from distribution cuts, but REITs have always been considered to be one of the safest of the various kinds of trusts.
"Right now, I don't see a big risk of distribution cuts," Mr. Belaiche said. "You'd have to see a lot more tenant bankruptcies. If that comes, then you're going to have pressure on rental income, and then on the payout ratio [the percentage of earnings paid out in distributions]."
Mr. Levant said current REIT prices in some cases reflect expected distribution cuts of as much as 50 or even 60 per cent. While he believes some REITs may have to trim their payouts, he sees the price plunge as being overdone.
The safest name in the REIT sector could well be Canadian Real Estate Investment Trust, which offers a high level of diversification through its portfolio of office, retail and industrial properties located across Canada. Canadian REIT's share price has fallen just 19 per cent this year and has a comparatively tiny yield of 5.8 per cent. "It's a heavyweight in the sector and the one you'd probably buy for the most reliable cash flow stream," Mr. Levant said.
Apartment REITs are considered to be an especially conservative type of REIT because demand for rental housing is more recession-resistant than other types of property. Of the two big TSX-listed apartment REITs, Canadian Apartment Properties and Boardwalk, Mr. Levant likes the former for its superior level of national diversification. Boardwalk has extensive properties in Alberta, where the economy is vulnerable to further declines in oil prices.
Two big retailing REITs, RioCan and Calloway, have been hit hard because of concerns about rising vacancy rates in a recession. But both get significant amounts of revenue from tenants that sell non-discretionary items like groceries and both health care and household products. Mr. Levant has rated both as being low risk on his website, IncomeTrustResearch.com.
There are roughly 26 REITs listed on the Toronto Stock Exchange, but Mr. Levant suggested investors stick to the most established ones, or at least members of the S&P/TSX capped REIT index.
"All the very best names are on sale, so why would you buy anything riskier?" he said.
Investors can buy the entire index through an exchange-traded fund called the iShares Cdn REIT Sector Index Fund, which is listed on the Toronto Stock Exchange under the symbol XRE. Other options can be found among mutual funds in the real estate equity category.
If you buy into the REIT sector now, you have to be prepared for further declines and you have to recognize that distributions could be cut. That said, the credit rating agency DBRS has a stable outlook on all of the nine REITs it analyzes but H&R (it's under review with a negative outlook).
Mr. Levant said a lot of potentially bad news has already been priced into REITs.
"They just look unbelievably cheap at this point."
REITs battered down to eye-catching levels
ROB CARRICK
00:00 EST Saturday, December 06, 2008
Who knew REITs could go so wrong?
Long thought of as a conservative way to generate income, real estate investment trusts met the wrecking ball in 2008. The buildings they own are still standing, but their shares have been pounded.
The benchmark stock index for REITs was down 49 per cent for the year through Dec. 4, a fair bit worse than the 42-per-cent plunge by the broad S&P/TSX composite index. Established names in the sector like RioCan, Calloway and H&R are down by 40 to 70 per cent, and their yields have gone into double-digit territory.
REITs are income trusts that hold portfolios of offices, malls and big-box stores, hotels, apartments or seniors housing. REITs make regular cash distributions like other income trusts and, for much of the decade, they also rose steadily in price. REITs gained some added appeal when they were largely exempted from the new income trust tax that will take effect in 2011.
Today, REITs face challenges from both the slowing economy and the global financial crisis. But there's a sense that some have fallen to levels that make them attractive buys right now.
"Valuations are getting pretty close to a floor in my opinion," said Oscar Belaiche, manager of the Dynamic FocusPlus Real Estate Fund and a vice-president at Dynamic Funds. "I wouldn't be rushing to sell today. As a matter of fact, selectively, we're buying selected REITs. There are some good REITs that have been beaten down to levels that don't make sense to us."
Before you consider buying REITs, you have to understand the factors that drove them down in price and threaten to cause further problems looking into 2009. One of the most serious difficulties is that REITs are having trouble getting financing as a result of heightened caution among banks about lending. "It's like a boa constrictor squeezing the real estate sector," Mr. Belaiche said.
The financing problem for REITs is exemplified by what's happened recently at H&R REIT, which is developing a huge office tower project in Calgary called The Bow. EnCana Corp., Canada's largest energy company, has agreed to locate its head office in the project, and yet H&R has been having trouble securing construction loans.
H&R units are down by almost 70 per cent this year, and the yield is around 23 per cent. Investors are obviously expecting a significant drop in H&R's monthly cash distribution, although this isn't a certainty. Last month, CIBC World Markets issued a report playing up the possibility that H&R will arrange financing without having to cut its distribution.
A weak economy is another problem for REITs, and it's one with potential to get worse in a lingering recession. Retail store closings and bankruptcies are bad for retail REITs. Rising layoffs are bad for office REITs. Reduced consumer spending is bad for hotel and even seniors housing REITs.
Harry Levant, an independent income trusts analyst, said current REIT prices already seem to reflect these eventualities. "The market has really built in an ugly scenario," he said.
Part of this negative outlook is the expectation that REITs will have to cut their distributions. No income trust is immune from distribution cuts, but REITs have always been considered to be one of the safest of the various kinds of trusts.
"Right now, I don't see a big risk of distribution cuts," Mr. Belaiche said. "You'd have to see a lot more tenant bankruptcies. If that comes, then you're going to have pressure on rental income, and then on the payout ratio [the percentage of earnings paid out in distributions]."
Mr. Levant said current REIT prices in some cases reflect expected distribution cuts of as much as 50 or even 60 per cent. While he believes some REITs may have to trim their payouts, he sees the price plunge as being overdone.
The safest name in the REIT sector could well be Canadian Real Estate Investment Trust, which offers a high level of diversification through its portfolio of office, retail and industrial properties located across Canada. Canadian REIT's share price has fallen just 19 per cent this year and has a comparatively tiny yield of 5.8 per cent. "It's a heavyweight in the sector and the one you'd probably buy for the most reliable cash flow stream," Mr. Levant said.
Apartment REITs are considered to be an especially conservative type of REIT because demand for rental housing is more recession-resistant than other types of property. Of the two big TSX-listed apartment REITs, Canadian Apartment Properties and Boardwalk, Mr. Levant likes the former for its superior level of national diversification. Boardwalk has extensive properties in Alberta, where the economy is vulnerable to further declines in oil prices.
Two big retailing REITs, RioCan and Calloway, have been hit hard because of concerns about rising vacancy rates in a recession. But both get significant amounts of revenue from tenants that sell non-discretionary items like groceries and both health care and household products. Mr. Levant has rated both as being low risk on his website, IncomeTrustResearch.com.
There are roughly 26 REITs listed on the Toronto Stock Exchange, but Mr. Levant suggested investors stick to the most established ones, or at least members of the S&P/TSX capped REIT index.
"All the very best names are on sale, so why would you buy anything riskier?" he said.
Investors can buy the entire index through an exchange-traded fund called the iShares Cdn REIT Sector Index Fund, which is listed on the Toronto Stock Exchange under the symbol XRE. Other options can be found among mutual funds in the real estate equity category.
If you buy into the REIT sector now, you have to be prepared for further declines and you have to recognize that distributions could be cut. That said, the credit rating agency DBRS has a stable outlook on all of the nine REITs it analyzes but H&R (it's under review with a negative outlook).
Mr. Levant said a lot of potentially bad news has already been priced into REITs.
"They just look unbelievably cheap at this point."
Wednesday, September 3, 2008
Sunstone Hotel Investors - new REIT pick
As oil continues to fall, it seems like REIT's are looking better and better. You might as well earn a nice yield while you wait for the real estate market to pick up again.
Here's an interesting pick that I've come accross.
Sunstone Hotel Investors, Inc. (symbol: SHO)
This a hotel REIT that had a relatively flat last quarter, however, as we all know hotels aren't fairing too well right now. So, results that are flat, may not be too bad in this market. The yield currently approx. 10%.
Here's where things get interesting. In August, the President and CEO together purchased $1.6 million worth of shares on the open market. (http://www.insider-monitor.com/trading/cik1295810.html)
Obviously they know something we don't. Their average cost was approx. $14, so try to pick the stock up as close to this price (or lower) as possible.
Here's an interesting pick that I've come accross.
Sunstone Hotel Investors, Inc. (symbol: SHO)
This a hotel REIT that had a relatively flat last quarter, however, as we all know hotels aren't fairing too well right now. So, results that are flat, may not be too bad in this market. The yield currently approx. 10%.
Here's where things get interesting. In August, the President and CEO together purchased $1.6 million worth of shares on the open market. (http://www.insider-monitor.com/trading/cik1295810.html)
Obviously they know something we don't. Their average cost was approx. $14, so try to pick the stock up as close to this price (or lower) as possible.
Thursday, August 14, 2008
Market Action & Another Insider Website
Well, oil has dropped signficantly and REIT's have faired pretty well lately. CapLease (LSE) has rebounded nicely and the 2nd quarter results for the Canadian REIT's have generally been quite good.
Where oil will go from here is anyone's guess as any additional political conflict (at time of writting Ruassia - Georgia) will cause a quick spike in prices. I still think, however, the overall trend is downward and will stay that way for the time being.
At this time, I would recommend picking up any additional REIT's whose yields seem too high based on positive 2nd quarter results. I don't think the yields will be that high much longer.
Furthermore, if you're looking at Canadian REIT's, here's an excellent website to track any insider trades:
http://www.canadianinsider.com/
Where oil will go from here is anyone's guess as any additional political conflict (at time of writting Ruassia - Georgia) will cause a quick spike in prices. I still think, however, the overall trend is downward and will stay that way for the time being.
At this time, I would recommend picking up any additional REIT's whose yields seem too high based on positive 2nd quarter results. I don't think the yields will be that high much longer.
Furthermore, if you're looking at Canadian REIT's, here's an excellent website to track any insider trades:
http://www.canadianinsider.com/
Friday, July 25, 2008
Insider Trades
Recently came accross this website which is extremely helpful (bookmark it!):
http://www.insider-monitor.com/insider_stock_purchases.html
It shows all the recent insider purchases for various stocks. As always, insiders know much more than the public and when they start buying their company's own stock (esp. in large quantities) it can mean good things to come. Look for large purchases that have been made over the past few weeks. Also, keep an eye out for multiple insiders (ie. CEO and directors) that are making large purchases around the same timeframe. They clearly know something we don't.
The website allows you to look at recent past insider buys, so try to spot the trends.
Keeping in the theme with REIT's, if you find one on there with solid fundamentals, a good yield, and large insider purchases, I would jump all over it.
http://www.insider-monitor.com/insider_stock_purchases.html
It shows all the recent insider purchases for various stocks. As always, insiders know much more than the public and when they start buying their company's own stock (esp. in large quantities) it can mean good things to come. Look for large purchases that have been made over the past few weeks. Also, keep an eye out for multiple insiders (ie. CEO and directors) that are making large purchases around the same timeframe. They clearly know something we don't.
The website allows you to look at recent past insider buys, so try to spot the trends.
Keeping in the theme with REIT's, if you find one on there with solid fundamentals, a good yield, and large insider purchases, I would jump all over it.
Tuesday, July 15, 2008
Canadian Income Trusts Update
Here's some of the latest news on the Canadian income trust sector. The details will be released in the fall, but essentially the Government is trying find a way to allow trusts to convert to corporations without a huge tax hit. This should do wonders for the sector as its been battered largely by the taxes they would have to pay come 2011.
If they develop a proper plan, this sector should take off again.
Furthermore, there is also a Government plan in the works to allow Canadian REIT's to buy property outside of Canada and still avoid income taxes. This would be huge as well. Stay tuned!
From Globeinvestor.com:
Ottawa releases rules on trust conversions
Reuters
July 15, 2008
The Canadian government released draft rules yesterday designed to allow income trusts to convert to a corporate structure without taking a tax hit. "We are guardedly optimistic that these guidelines will provide income trusts with the clarity they so desperately need to make structural decisions going forward," said George Kestevan, chairman of the Canadian Association of Income Funds. Finance Minister Jim Flaherty stunned investors in October, 2006, with a surprise plan to begin taxing the then $200-billion income trust sector as of 2011, backtracking on a Conservative Party campaign promise. Trusts are popular investment vehicles structured to pay little or no corporate tax, allowing them to pass on a steady flow of cash to unitholders as distributions. But Mr. Flaherty said the sector's growth threatened government tax revenues. The new tax prompted most trusts to plan to restructure as corporations.
If they develop a proper plan, this sector should take off again.
Furthermore, there is also a Government plan in the works to allow Canadian REIT's to buy property outside of Canada and still avoid income taxes. This would be huge as well. Stay tuned!
From Globeinvestor.com:
Ottawa releases rules on trust conversions
Reuters
July 15, 2008
The Canadian government released draft rules yesterday designed to allow income trusts to convert to a corporate structure without taking a tax hit. "We are guardedly optimistic that these guidelines will provide income trusts with the clarity they so desperately need to make structural decisions going forward," said George Kestevan, chairman of the Canadian Association of Income Funds. Finance Minister Jim Flaherty stunned investors in October, 2006, with a surprise plan to begin taxing the then $200-billion income trust sector as of 2011, backtracking on a Conservative Party campaign promise. Trusts are popular investment vehicles structured to pay little or no corporate tax, allowing them to pass on a steady flow of cash to unitholders as distributions. But Mr. Flaherty said the sector's growth threatened government tax revenues. The new tax prompted most trusts to plan to restructure as corporations.
Tuesday, July 1, 2008
U.S REIT's
Given the real estate market decline in the United States, along with a severe credit crunch, there are currently some excellent opportunities in picking up some REIT's.
Generally, there are three kinds of REIT's in the U.S:
1) those that invest directly in multi-tenant properties (ie. stip malls, apartment complexes, etc.)
2) those invest directly in single tenant properties (ie. owning a building that is leased soley to Wallgreens)
3) those that invest in mortgages and debt relating to real estate.
I've always shyed away from #3 as you are essentially investing in someone elses debt and even though there is collateral on the debt, you are not directly investing in the hard assets.
As a side note, most U.S REIT's pay distributions quarterly.
Here are a few good picks for mult-tenant properties that, in my opinion, are solid investments and have (unfairly) declined along with the rest of the real estate market:
- AvalonBay Communities (symbol: AVO)
large apartment communities, solid dividend record, currently yields approx. 4%
- CBL & Associates Properties (symbol: CBL)
regional malls and community neighborhood centers, currently yields approx. 9.5%
- Liberty Property Trust (symbol: LRY)
industrial and office properties, primarily in Maryland, totally self-administered and self-managed, currently yields approx. 7.5%
Single-tenant REIT's:
- CapLease (symbol: LSE)
been very unfairly hammered, dividend is completely covered by cashflow, currently yields approx. 10.7%
- Lexington Realty Trust (symbol: LXP)
currently yields approx. 9.7%
Generally, there are three kinds of REIT's in the U.S:
1) those that invest directly in multi-tenant properties (ie. stip malls, apartment complexes, etc.)
2) those invest directly in single tenant properties (ie. owning a building that is leased soley to Wallgreens)
3) those that invest in mortgages and debt relating to real estate.
I've always shyed away from #3 as you are essentially investing in someone elses debt and even though there is collateral on the debt, you are not directly investing in the hard assets.
As a side note, most U.S REIT's pay distributions quarterly.
Here are a few good picks for mult-tenant properties that, in my opinion, are solid investments and have (unfairly) declined along with the rest of the real estate market:
- AvalonBay Communities (symbol: AVO)
large apartment communities, solid dividend record, currently yields approx. 4%
- CBL & Associates Properties (symbol: CBL)
regional malls and community neighborhood centers, currently yields approx. 9.5%
- Liberty Property Trust (symbol: LRY)
industrial and office properties, primarily in Maryland, totally self-administered and self-managed, currently yields approx. 7.5%
Single-tenant REIT's:
- CapLease (symbol: LSE)
been very unfairly hammered, dividend is completely covered by cashflow, currently yields approx. 10.7%
- Lexington Realty Trust (symbol: LXP)
currently yields approx. 9.7%
Tuesday, June 17, 2008
Canadian REIT's
Here are currently a few of my favorite picks for Canadian REIT's with varying yields and risk. All of these pay distributions on a monthly basis.
- RIOCAN REIT (symbol: rei.un), the largest REIT in Canada, large holdings in retail centers, large malls, big box tenants, etc. Has several partnerships with large developers and U.S real estate firms. Currently yields approx. 6.5%
- Calloway REIT (symbol: cwt.un), similar to Riocan although not quite as large. Still considered one of the largest REIT's in Canada though. Currently yields approx. 7.2% (in my opinon one of the best buys for larger REIT's that usually have a lower yield)
- Huntington REIT (symbol: hnt.un), a Manitoba play with the majority of its holdings in Winnipeg. Smaller REIT with an ephasis on office rather than retail. Should have excellent growth opportunities considering Manitoba real estate is doing very well, also has rumors of a buyout in the future. Currently yields approx. 13.2%
- Scotts REIT (srq.un), a small box retail REIT with a focus on single tenant restaurant buildings (ie. KFC, etc.). Stock price has been hammered on a rumors of a credit problem but so far the distribution has been rock solid. Currently yields approx. 14.5%
- Lakeview Hotel REIT (lhr.un), a Western Canada hotel REIT that is currently buying smaller hotels and rebranding them under the Lakeview name. Holdings primarily in B.C and Alberta, catering to the oil and gas industry. Currently yields approx. 11.7%
As with any focused investment strategy, diversify your holdings over a range of types and yields. These five offer differences in risk, types of real estate, and location.
- RIOCAN REIT (symbol: rei.un), the largest REIT in Canada, large holdings in retail centers, large malls, big box tenants, etc. Has several partnerships with large developers and U.S real estate firms. Currently yields approx. 6.5%
- Calloway REIT (symbol: cwt.un), similar to Riocan although not quite as large. Still considered one of the largest REIT's in Canada though. Currently yields approx. 7.2% (in my opinon one of the best buys for larger REIT's that usually have a lower yield)
- Huntington REIT (symbol: hnt.un), a Manitoba play with the majority of its holdings in Winnipeg. Smaller REIT with an ephasis on office rather than retail. Should have excellent growth opportunities considering Manitoba real estate is doing very well, also has rumors of a buyout in the future. Currently yields approx. 13.2%
- Scotts REIT (srq.un), a small box retail REIT with a focus on single tenant restaurant buildings (ie. KFC, etc.). Stock price has been hammered on a rumors of a credit problem but so far the distribution has been rock solid. Currently yields approx. 14.5%
- Lakeview Hotel REIT (lhr.un), a Western Canada hotel REIT that is currently buying smaller hotels and rebranding them under the Lakeview name. Holdings primarily in B.C and Alberta, catering to the oil and gas industry. Currently yields approx. 11.7%
As with any focused investment strategy, diversify your holdings over a range of types and yields. These five offer differences in risk, types of real estate, and location.
Friday, June 6, 2008
DRIP Programs
Before I start discussing specific REIT's, I want to mention how you can make a dividend paying stock perform similar to a growth stock. Most dividend payings stocks, be it income trusts, REIT's, or common shares, have a dividend reinvestment program (DRIP). This allows you to forgo the monthly (or quarterly) cash payments and recieve more shares instead.
The beauty of this program is you get the shares at a discount to the average trading price of that month and you pay no commission to the broker. Furthermore, everytime you leave the shares in the DRIP program, the share payments compound upon themselves. Essentially you are expanding your possible income every single month (or quarter).
The increase in shares means an increase in the value of your holdings, making it perform similar to a growth stock. Also, this partially helps protect your holdings if the stock goes down in price because you then receive more shares in the DRIP as the average trading price is lower.
For example, if the stock drops and you're in the DRIP program, your possible income will grow faster (as long as the distribution amount is unchanged), and then if the stock rebounds, you're value goes up significantly.
There is some great opportunities to buy dividend paying stocks of good companies when their share prices are undervalued. Buy them, leave them in the DRIP program, and once the stock recovers your income and value has grown. Not bad.
Obviously it takes a lot of discipline to keep shares in the DRIP because you don't get the cash payments. I will tell you this though, IT IS WORTH IT.
The beauty of this program is you get the shares at a discount to the average trading price of that month and you pay no commission to the broker. Furthermore, everytime you leave the shares in the DRIP program, the share payments compound upon themselves. Essentially you are expanding your possible income every single month (or quarter).
The increase in shares means an increase in the value of your holdings, making it perform similar to a growth stock. Also, this partially helps protect your holdings if the stock goes down in price because you then receive more shares in the DRIP as the average trading price is lower.
For example, if the stock drops and you're in the DRIP program, your possible income will grow faster (as long as the distribution amount is unchanged), and then if the stock rebounds, you're value goes up significantly.
There is some great opportunities to buy dividend paying stocks of good companies when their share prices are undervalued. Buy them, leave them in the DRIP program, and once the stock recovers your income and value has grown. Not bad.
Obviously it takes a lot of discipline to keep shares in the DRIP because you don't get the cash payments. I will tell you this though, IT IS WORTH IT.
Tuesday, June 3, 2008
REIT's
We all know that real estate has been struggling over the past two years, new projects are on hold, retail is barely hanging on, and home builders are probably by far the worst off. Real estate though, is one sector of investments that always has hard assets to back it up. Invest in a tech company and you're dealing with endless amount of patents, hype, unkown markets, etc. but real estate is brick and mortars... you can see exactly what it is and understand its purpose.
To invest directly into real property and be successful at it, keep an eye out for my new blog regarding "hands on" real estate investing. For now though, I will discuss Real Estate Investment Trusts (REIT's).
REIT's trade on the stock markets and are, for the most part, exempt from corporate taxes as they pass on the majority of their income to the stockholder. This sounds similar to Income Trusts as discussed below, however, they have been around for decades and no Government legislation is expected to change it. They usually pay a decent yield (either monthly or quarterly) and are quite popular in both the United States and Canada.
Since the real estate downturn, there are currently some tremendous opportunities to get into REIT's. Share prices are down, yields are up. Pick out some good ones and you get a nice cash yield while you wait for the sector to rebound, and then get the appreciation on the stock units themselves on the backend. I think we're at a great time to buy REIT's because even though the prices are down accross the board, they have now stabilized. The pain for the most part is over, and many of the good REIT's with an excellent track history are ripe for the taking.
In my next couple of blogs, I will outline my current favorite picks for both U.S and Canadian REIT's.
To invest directly into real property and be successful at it, keep an eye out for my new blog regarding "hands on" real estate investing. For now though, I will discuss Real Estate Investment Trusts (REIT's).
REIT's trade on the stock markets and are, for the most part, exempt from corporate taxes as they pass on the majority of their income to the stockholder. This sounds similar to Income Trusts as discussed below, however, they have been around for decades and no Government legislation is expected to change it. They usually pay a decent yield (either monthly or quarterly) and are quite popular in both the United States and Canada.
Since the real estate downturn, there are currently some tremendous opportunities to get into REIT's. Share prices are down, yields are up. Pick out some good ones and you get a nice cash yield while you wait for the sector to rebound, and then get the appreciation on the stock units themselves on the backend. I think we're at a great time to buy REIT's because even though the prices are down accross the board, they have now stabilized. The pain for the most part is over, and many of the good REIT's with an excellent track history are ripe for the taking.
In my next couple of blogs, I will outline my current favorite picks for both U.S and Canadian REIT's.
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