The REIT market is on fire.
And it’s easy to see why...
With baby boomers heading off into retirement and filing for Social Security benefits at a rate of 10,000 per day, these investors are looking for a safe and steady income stream.
Take residential mortgage REIT American Capital Agency (NASDAQ: AGNC), for example.
Mortgage REITs are probably the most popular form of REITs today because of the high dividend yields they pay.
And without a doubt, American Capital Agency has been one of the most popular REITs since the financial crisis in 2008.
But it appears to be getting even more popular...
- It pays a quarterly dividend of more than 14% (bullish!)
- An insider purchased nearly $700,000 worth of AGNC earlier this month (bullish!)
- The stock is sitting at record levels (bullish!)
Take a look at the performance of AGNC since going public in May 2008:
It has destroyed the Dow.
So not only are you getting a nice dividend check in the mail every three months ($1,400 on every $10,000 worth of AGNC), but your investment is growing.
American Capital Agency isn’t alone.
These mortgage REITs have had stellar returns, too:
- Two Harbors (TWO) — record high (dividend yield of 14%)
- Hatteras Financial (HTS) — one-year high (dividend yield of 12.6%)
- CYS Investments (CYS) — three-year high (dividend yield of 14%)
Across the board, REITs are making all-time and multi-year highs almost on a weekly basis.
Remember what I said in my article on REITs on August 15:
The type of real estate an REIT can invest in is varied.
They can invest in office buildings, strip malls, big box retail buildings, amusement parks, theaters, sports stadiums, hotels, nursing homes, hospitals, even farmland and world-class vineyards.
That’s why the latest REIT to pop up on my screen has me bullish on the U.S. economy...
It's Rayonier REIT (NYSE: RYN), specializing in timber production.
Rayonier owns, leases, or manages over 2.7 million acres of timberland. Its wood is used for construction framing of new homes.
Now, remember when I told you that homebuilding stocks were breaking out and making multi-year highs?
This trend is continuing. As a group, homebuilding stocks are the third best-performing group in 2012.
But if you really want to see the health of the housing market, take a look at this chart of Rayonier:
Rayonier is up more than 200% in the last three years.
Currently, Rayonier is yielding 3.6%. Not bad, but it’s not the best you can get...
You see, Rayonier’s dividend has remained largely unchanged for the past few years. As the stock price has risen, the yield has contracted.
But imagine the lucky person who bought Rayonier during the March 2009 crash... Back then RYN was yielding almost 13%.
If investors held, they’ve done extremely well.
Even though these REITs have rallied the past few years — and they are a great way to collect extra income — there are risks.
If housing construction stalls, timber demand will soften; if interest rates go up, the spread the mortgage REITs have enjoyed will be wiped out.
That’s why my favorite REIT right now has nothing to do with housing, timber, or mortgages...
It simply collects rent from some of the world’s biggest retailers. It then distributes the rent it collects to its shareholders. And it does it every single month.
In essence, it’s the landlord to the world’s most profitable retail chains.
Imagine collecting a rent check from the likes of Wal-Mart, Lowe's, and Target...
Talk about the safest of the safe.
And perhaps most appealing, it’s consistent. It’s never missed a dividend payment to its investors.
No wonder Forbes Magazine featured this little-known landlord as a “Top 25 Dividend Stock.”
I have a new report detailing this special situation — and how you too can start receiving monthly rental checks from Wal-Mart. You can access your free copy right here.
Brian is a founding member and President of Angel Publishing and investment director for the income and dividend newsletter The Wealth Advisory. He writes about general investment strategies for Wealth Daily and Energy & Capital. Known as the "original bull on America," Brian is also the author of the 2008 book, Profit from the Peak: The End of Oil and the Greatest Investment Event of the Century. In addition to writing about the economy, investments and politics, Brian is also a frequent guest on CNBC, Bloomberg, Fox and countless radio shows. For more on Brian, take a look at his editor's page.