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Top REIT Stocks: Lexington Realty's Yield Leads Group

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R eal estate investment trusts may not be what comes to mind when investors think of growth stocks.

But they've been gaining ground recently, with the Finance-Property REIT group rising to No. 19 in Monday's issue among IBD's 197 industry groups, from No. 58 six weeks ago.

REITs, which invest in real estate, are required to pass on 90% of their income to shareholders in the form of dividends. Their stock prices can appreciate, but dividends account for the bulk of their return.

Lexington Realty Trust ( LXP ) acquires, owns and manages office, industrial and retail properties across the U.S. It specializes in net leases, in which the tenant is responsible for most -- if not all -- operating costs such as real estate taxes, repairs and utilities.

Many of its properties are "built to suit" the needs of its customers. It currently has five such build-to-suit projects in the works, including industrial and office properties, as well as a private school.

The New York-based company is one of the top dividend payers of the REITs that make IBD's dividend screen. Lexington paid a Q4 dividend of 17 cents per share, or 68 cents for the full year, for a 6% yield. By comparison, the average payout for the S&P 500 is 1.9%.

Lexington recently narrowed its full-year guidance for funds from operations (as REITs' earnings are called) to a range of $1.09 to $1.11 per diluted share from the $1.08 to $1.11 it forecast earlier. Analysts expect $1.11 for 2014 and a 3% slip to $1.08 this year.

During Q4, Lexington acquired three properties for $70 million, completed 1.9 million square feet of new leases and lease extensions, and retired $59 billion of debt. It also sold four office buildings, generating $167.2 million in gross disposition proceeds.

Shares are up 6% this year and 20% from an early October low. They've been finding support above their 10-week moving average the past three months.

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


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

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