Opportunity Abounds In Battered REIT Market

But these days, Meredith mostly likes what he sees in REITs — even if he finds it "terrifying" to try sorting those mostly likely to rebound from the ones that will continue foundering.

"The prices of some pretty well-run companies have dropped significantly," he said. "But boy, you have got to be real selective — real selective."

REITs boast particularly attractive dividend yields — the amount of the dividend paid divided by the share price. (For example, if a company's annual dividend is $1.50 and the stock trades at $25, the dividend yield is 6 percent.) Historically, REIT dividend yields average around 5 percent to 6 percent. The yield now? About 8 percent. As recently as February, before REIT shares managed a modest comeback, the average was an even loftier 11 percent.

If you find current yields too enticing to pass up, you'll probably do OK if you're a long-term investor. But good luck if you're looking to get in and out of a REIT fund or stock quickly, or aren't willing to examine the lingering debt and other troubles that cloud the outlook for many REITs.

"The industry faces refinancing risks, falling rents and continued dividend cuts on top of high leverage," said Rob Ivanoff, an analyst with fund industry tracker Financial Research Corp. in Boston. "Investors should stick to REITs that have stronger balance sheets and high-quality assets."