Investing For Retirement: REITS and Preferred Stock ETFs and Funds

Some investment advisers are fond recommending REITs for investors seeking yields of 4% or more. One such adviser is T. Eric Reich, the president and founder of Reich Asset Management.

"I like REITs, particularly private, because they aren't subject to market panics like public REITs which tend to move in lock step with the market when the market falls," he says.

Of note, there are three types of REITs: publicly traded REITs, non-traded REITs, and private REITs. According to the SEC: Private REITs -- similar to non-traded REITs -- are not listed, making them hard to value and trade. Private REITs also do not regularly file disclosure reports with the SEC, possibly making it difficult for you to keep informed of your investment. Instead, private REIT offerings are private placements and rely on an exemption from the obligation to register with the SEC. Investments are typically limited to accredited investors.

Even though such non-traded and private REITs lack liquidity (your money will be tied up for three to seven years depending on the product) and some have higher fees (front-end fees that can be as much as 15% of the per share price, according to Finra), Reich says such REITs typically return around 5% -- though you can can do a little better/worse depending on the issue.

One non-traded REIT that Reich likes is Griffin Capital's Healthcare REIT IV, which has a 5.97% yield. That REIT, according its website, is a publicly registered, non-traded real estate investment trust REIT that seeks to capitalize on:

  • The growth of undeniable demographic trends;
  • The strength of the healthcare industry; and
  • The expertise of a management team dedicated exclusively to healthcare real estate.
The Griffin-American Healthcare REIT IV is sponsored by American Healthcare Investors and Griffin Capital Company.

Reich said investors might also consider preferred stock ETFs and mutual funds. Two options:

The iShares U.S. Preferred Stock ETF (PFF), which seeks to track the investment results of an index composed of U.S. preferred stocks. Distribution yield as of May 31, 2018, 5.94%; 12-month trailing yield as of May 31, 2018, 5.58%; 30-Day SEC yield as of May 31, 2018, 5.68%.

Top 10 Holdings as of June 28, 2018

Ticker

Name

Weight (%)

BLKFDS

BLK CSH FND TREASURY SL AGENCY

4.01

BDX

BECTON DICKINSON AND COMPANY

2.1

ALLY

GMAC CAPITAL TRUST I

1.92

BACR

BARCLAYS BANK PLC

1.88

C

CITIGROUP CAPITAL XIII

1.63

WFC

WELLS FARGO & COMPANY

1.43

CCI

CROWN CASTLE INTERNATIONAL CORP

1.23

WFC

WELLS FARGO DEPOSITARY SHARES CO

1.16

PNC

PNC FINANCIAL SERVICES GROUP INC

1.13

C

CITIGROUP DEPOSITORY INC

1.12

The Principal Preferred Securities A (PPSAX), which seeks to provide current income by investing primarily in preferred stocks of U.S. companies rated BBB or higher. The fund invests at least 80% of its assets in preferred stocks. The fund focuses on utility, financial services and manufacturing industries, and has 30-day SEC yield of 4.29%.

Top 10 holdings as of April 30, 2018

Holding

% of Net Assets

Jpmorgan Chase & Co

2.61

Centaur Fdg Pfd 144A

1.94

Cooperatieve Rabobank U.A. 11%

1.76

Citigroup Inc. 6.25%

1.57

Nationwide Fin

1.56

Liberty Mutual Group

1.51

Wells Fargo & Co

1.51

Wells Fargo & Co 7 1/2 % Non Cum Perp Conv Pfd Shs -A- Series -L-

1.39

MetLife Inc. 10.75%

1.35

Bank of New York Mellon Corporation 4.95%

1.34