Best REIT dividend stocks

Best REIT dividend stocks


Finding the Best High Dividend Stocks

Where can you find the very best high dividend stocks? Every Industry Sector has certain dividend paying stocks which are the best stocks to buy for dividend income. However, a few sectors feature higher, or more secure dividends than others.

The Energy and Basic Materials sectors are two places and you’ll discover some of the best stocks that offer a high dividend deliver.

Several of the companies in these sectors are LP’s, (Restricted Partners), or MLP’s, (Master Limited Partners), that have to pay out at least 90% of their income to “unitholders”, in substitution for not paying corporate taxes. (LP’s and MLP’s list their own shares as units, hence the term, “unitholder”, is the identical to shareholder. )#)

One key thing to check right off the bat may be the firm’s dividend payout ratio, in other words, how much of their earnings are they paying out as dividends. You should also look at their dividend growth rate during the last 5-10 years, if possible.

For an LP or MLP, watch out for firms where the dividend payout ratio goes above 100-110%, based upon how they treat depreciation.

For other firms, excepting REIT‘s, you might want to screen for dividend payout ratios below 65-70%. Another metric to look at is the firm’s operating profit margin. Is it substantially greater than their dividend yield? If not, they may eventually have in order to cut their dividend, since their current margin can’t sustain their own current yield.

REIT’s are another specially classified firm, that also shell out 90%-plus in dividends, in exchange for not paying corporate taxation’s. Due to this arrangement, you’ll find many high dividend stocks within the REIT sub-sector of the Financials sector.

In the 2008-2009 credit score crisis, there has been a lot of concern over the heavy current debt lots of many REIT’s, especially those in the commercial real estate field.

Since these types of REIT’s finance projects with debt, investors ecame increasingly worried about the firms’ ability to refinance current debt obligations. The easing from the credit crisis has helped this situation in 2009, and many firms purchased the market rally to issue new stock, thereby recapitalizing.

Something to note about the distributions, (dividends), from MLP’s/LP’s as well as REIT’s, is that they do not qualify for the present 15% qualified dividend tax rate. To mitigate this, they classify a part of their distributions as “Return of Capital”. You may want to consult your accountant before purchasing REIT’s or MLP’s/LP’s, in order to determine your tax chew and net yield after taxes, etc.

Even though dividend yields have declined as stocks’ prices have rallied last year, you can still find many high dividend stocks in the fundamental Materials, Energy, and Financial sectors. In fact, some of these types of dividend stocks have yields over 10%, and have the earnings to aid a high dividend.

REITs

Dividend Stocks – How to Pick All of them

You are right to seek dividend paying stocks. According in order to Ned Davis Research, from 1972 to 2006 dividend paying stocks returned 10% annually when compared with only 4% for non-dividend paying stocks. Other studies show that from 1926 to 2006 almost 1 / 2 of the S&P 500’s return was due to dividends paid through the companies.
Here is my checklist for picking a dividend share.

  • Simple Business: Companies that execute a simple business plan. They concentrate on their main core business, not growing into areas they do not understand. No conglomerates here.
  • High Cash Balance: Our best prospect should carry a minimum of next quarters dividend in cash. This isolates them from an unexpected downturn throughout the economy, or a new competitor.
  • Low Debt Balances: Credit can be costly or nonexistent in a credit crunch (like now). Also if your company is highly leveraged, when their interest rates increase income suffers. This may put pressure on dividends.
  • Positive Cash Circulation: Duh. If they are not turning consistent profits, the dividend isn’t sustainable.
  • Recession Proof Demand: Stick with companies whose products aren’t sensitive to economic changes. Consumers have to eat, they do not have to buy cars.

Reasonable Pay-out Ratio: We don’t want a company that’s bleeding all cash flow off in dividends. That doesn’t let them build cash for expansion in order to weather tough times. It also places them close to needing to borrow money if they have a tough quarter. Look for any pay-out ration of less than 75%.
Not every great company may fit many of these criteria, but keep them in mind when researching prospective companies to possess.
These rules don’t strictly apply to Real Estate Investment Trusts (REIT) or even Master Limited Partnerships (MLP). They have to shell out high dividends to maintain their tax status. This can end up being good, but it can bite in a downturn like right now.

REIT’s have no money put aside from their high lease, high occupancy past, now rents are renewing at lower prices and occupancy is suffering. They are finding it difficult in order to renew debt.

Leave a Reply

Your email address will not be published. Required fields are marked *