BALTIMORE (Stockpickr) -- What started out as a stellar year for real estate investment trusts, or REITs, has become a rough one in just a few months. Since the word "taper" entered investors' vocabulary, they couldn't unload these unique names fast enough -- but now, it looks like they've overdone it.
And that's creating a big opportunity for anyone willing to step in and buy.
It's not shocking that Bernanke and company torpedoed REIT prices by talking about tapering their unprecedented asset buying. You see, despite their usefulness as a way to get exposure to real estate in your portfolio, REITs are really purpose-built income generation machines. U.S. tax rules give REITs the ability to pass on the vast majority of their income to investors in the form of dividends, and as a result, these vehicles can sport higher yields than most conventional corporations.
So, the potential that the Fed's break-pumping will raise interest rates makes REITs look less attractive. Yes, if the Fed stops buying treasuries, it's very likely we'll see yields rise -- but the notion that REITs suddenly become less attractive because no one wants to buy treasuries anymore is crazy. And it ignores the fact that the Fed is likely to keep the federal funds target rate near zero. Translation: REITs are due for a bounce.With so many names sporting impressive yields after getting sold off this summer, investors who take the plunge into real estate investment trusts could be sitting on very favorable dividend payouts for as long as they hold. That's why we're taking a closer look at five REITs worth owning to call the Fed's taper bluff this fall.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV