BALTIMORE ( Stockpickr) -- If you're an income investor, real estate investment trusts (better known as REITs) probably hold a special place in your heart. After all, this special class of stock is basically purpose-built to generate investment income. That's saying a lot in an environment where rates are effectively zero.
But with around 220 REITs floating around on public exchanges, knowing which ones to buy and which to ignore can be quite a chore. That's why today we're taking a closer look at five favorite REITs for income investors.
As the name implies, REITs own real estate (or real estate-related assets like mortgages). But don't think of these stocks as a way to get exposure to the real estate sector. Instead, most are better thought of as a pure-play income generation tool. That's largely because of a tax law passed in 1960 gives REITs the ability to skip paying taxes by passing on earnings to investors. The caveat is that they have to distribute 90% of their earnings to their owners. As a result, they typically sport very big dividend yields.>>5 Surprise Stocks the Pros Love Right Now 2013 has been a stagger-start year for REIT investments. By and large, these trusts have failed to match the breakneck pace of the S&P 500. But with relative strength coming back into the sector this summer, that could be about to change. There are many different flavors of REITs on the market right now; here's a look at five that offer a best-in-class combination of high yields, gain potential, and niche business appeal. >>5 Stocks Under $10 Set to Soar These REIT names are worth owning in 2013.