Displaying items by tag: rates

(New York)

REITs are a tough area to invest in right now. On the one hand they look vulnerable because of the rising rate environment, but they have also surged recently at the same time as offering enticing dividends for investors. The answer, then, may be to find undervalued REITs, and Barron’s has put out an article helping to do just that. Here are some REITs the publication highlights: Invitation Homes, Front Yard Residential, Digital Realty Trust, InterXion Holding, LaSalle Hotel Properties, and Extended Stay America.

FINSUM: REITs tend to have very good dividends, but tend to suffer during periods of rising rates because of this. They seem like a good source of income right now, but need to be chosen very carefully.

(New York)

Sometimes balancing good dividends with strong growth is hard. The best dividends tend to come from mature and stable companies, but they often don’t have the best growth prospects. This is usually fine, but it does make them vulnerable in rising rate periods. According, here are ten stocks with strong dividends and good growth potential: SAP, Motorola, NetApp, Logitech, Garmin, Verizon, AT&T, Vodafone, Centurylink, and Consolidated Communications.

FINSUM: This list is very tech and telecoms heavy, but that seems a good balance if you are looing for both growth and strong dividends.

(New York)

Rates look to be rising quickly. The economy is red hot and the Fed is hawkish, meaning two more rate hikes this year look very likely. With that in mind, investors need to protect themselves from rate risk. That means a lot of sources of income, like dividends stocks and bonds, could become sources of losses. However, fortunately there are numerous ETFs that can help investors earn income while protecting against losses. One such is Pimco’s 0-5 Year High Yield Corporate Bond (HYS). The ETF has a yield approaching 5% and has a duration of just over 2 years, putting it in the low duration category (meaning it has low rate risk).

FINSUM: This seems like a good option if you want to earn high rate-protected income. Given the current rate environment, funds like these should probably be a fixture of most portfolios.

(New York)

The Fed seems almost certain to hike later this month, as well as in December. Rates heading higher looks like a certainty. So what does that mean for high yielding equity sectors which many Americans rely on for dividend income? The answer is a mixed picture. Pure rate-driven sectors like utilities, real estate, and telecoms will likely be hurt, but high-yielders like healthcare and and consumer staples should hold up better because their businesses can generate a lot of cash that can be returned to shareholders via dividends and buybacks.

FINSUM: Pharma has returned over 12% this year while real estate is just around 2%, showing how the former can outperform in rising rate environments.

(New York)

A REIT as an ETF might be an odd concept for some advisors. Since REITS are a special asset class unto themselves, and ETF made up of them could seem foreign. Their big advantage is that they are much cheaper than actively managed real estate strategies. However, risks abound, especially as many REITs tend to focus only on the US market, which could be very risky at the moment. One good REIT ETF is the Schwab US REIT, which has returned over 5% this year despite rising rates, and sports a 4%+ yield. Schwab points out that one of the best parts of REITS is that they “do not move in lockstep with either stocks or bonds.” The Vanguard Real Estate ETF is another good REIT choice. For global exposure try the SPDR Dow Jones Global Real Estate.

FINSUM: We like REITs in principal, but rates are a big worry at the moment. They seem like a good way to earn yield right now, but should probably be hedged.