This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Time to Focus on Blue-Chip REITs

Stocks in this article: O PSA SPG STAG WSR

NEW YORK ( TheStreet) -- Although the blue lights aren't flashing yet in REIT-land, last week's market reset has created some special buying opportunities for dividend investors, notably the blue-chips.

Bernanke's recent comments sent REITs tumbling as many of the expensive, best-in-class REITs suddenly started to see a "margin of safety" starting to widen.

Uncle Ben (Bernanke) gave us little indication when rates would start to rise, but the mere reference (to rising rates) brought unexpected momentum to the selloff last week.

Some of the big landlords, such as Realty Income (O - Get Report), Ventas (VTR), Public Storage (PSA - Get Report) and Simon Property Group (SPG - Get Report), all dropped into fair-value range.

In addition, Healthcare Trust of America (HTA), Retail Opportunity Investment Corporation (ROIC), Excel Trust (EXL) and Monmouth REIT (MNR) all saw shares slide.

It's clear that interest rates will begin to creep up, and although there is risk in REIT balance sheets -- too much variable-rate debt -- a strengthened economy means jobs are being added, cars are being purchased and stores are filling up.


We are just three years into a recovery of historic proportions, and any increase in interest rates gives meaningful evidence that commercial real estate is getting stronger.

I am concerned about REITs with lower-quality tenants as it's apparent that a rise in debt costs could take a toll on certain rent-payers. For example, I would make certain that your investments are risk-aligned and you're being compensated for the added risk of poor tenant or thin demographic quality.

For example, STAG Industrial (STAG - Get Report), Whitestone REIT (WSR - Get Report), and Gladstone Commercial (GOOD) are REITs that own properties in secondary markets with a considerable number of weaker tenants. When interest rates begin to rise, these lower quality tenants will be under more pressure, and that could impact occupancies for these REITs.


Although you will not be able to find them in the bargain basement, the blue-chip REITs are likely to provide safe and reliable dividend income. I especially like the REITs that have demonstrated a long track record of paying and increasing dividends.

By focusing on dividend safety, you'll be able to establish some worthy targets that could enable you to weather the rising interest rate clouds.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,672.60 -141.38 -0.79%
S&P 500 2,051.82 -11.33 -0.55%
NASDAQ 4,757.8790 +7.4820 0.16%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs