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3 Unloved High-Yielders That Will Rise With Rates (and pay up to 7% in cash!)


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By Brett Owens

Once again, almost everyone has gotten sucked in by a tired investor slogan thataEURtms dead wrongaEUR"and itaEURtms costing them big gains (and income).

But thataEURtms good news for contrarians like us, because we can bank some easy profits thanks to this all-too-predictable reflex.

ThataEURtms especially true now that the Federal Reserve has sent out a blaringly obvious signal that itaEURtms stuck to its rate-hike track, calling the economy aEURoestrongaEUR after its latest meeting last week.

But letaEURtms not get ahead of ourselves. Before I go further, the shopworn myth IaEURtmm talking about is that REITs nosedive when interest rates rise.

Many folks just canaEURtmt be talked out of it, despite all evidence to the contrary, including the fact that REITs skyrocketed during the last sustained rising-rate cycle , in 2004aEUR"06.

Taking the Short View

This aEURoewisdomaEUR is deceiving because it looks true: around the time the Fed raises rates or the yield on the benchmark 10-year Treasury takes off, REITs do take a hit.

To see this in action, check out the movements of the Vanguard Real Estate ETF ( VNQ ) and the yield on the 10-year Treasury in the first two months of 2018. ThereaEURtms no doubt the higher Treasury yield weighed down REITs back then:

Rates Up, REITs Down?


But thataEURtms a very short timeframeaEUR"just two months! And folks who dumped perfectly good REITs over the side back then have missed out on a huge rally since.

Because after plunging as low as 13% on the year in February, VNQ has surged, mainly on strong REIT earnings as the growing economy powers rent increases and demand for space.

The result? As of this writing, VNQ is underwater by a mere 1.5%!

REIT Worriers Miss OutaEUR"and Our Buy Window Narrows


That means just one thing: our time to buy REITs cheap is running out.

But if youaEURtmve been on the sidelines this year, donaEURtmt worry. Even though REITs arenaEURtmt the screaming deal they were six months ago, there are still bargains waiting for us in this rebounding sector.

IaEURtmll show you 3 great examples (with dividend yields up to 5.2%) in a moment. First, we need to talk about one popular REIT sector thataEURtms gotten way ahead of itself.

Retail REITs: Great for Gamblers, Lousy for Investors

Mall landlords are so popular, theyaEURtmre all most people think of when they hear about REITsaEUR"totally forgetting all the other (and often higher-yielding) corners of the sector: everything from cell tower REITs to apartment landlords, self-storage operators and warehouse owners.

The truth is, retail REITs are fine to trade in and out of aEUR

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Options
Referenced Symbols: VNQ , STAG , ARE , BXP , SPG



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