Sunday, January 29, 2012

Adding a new REIT

My goal with the e-FinancialWriter REIT Index is to show how real estate can provide attractive returns in good times and bad. I plan to accomplish that with approximately 10 REIT stocks across several sectors of the economy. There are now eight in three sectors: Self-storage, health care, and Canada.

The strategy is working ...

The Index is up 25.44% since I introduced you to my first REIT, Public Storage (PSA), on 3/14/10.

And today, I’m adding a fourth sector, retail properties.

Here’s why:

  • The Department of Commerce reported that December 2011 retail and food services sales were up 6.5% from one year ago.

  • Total sales for the full year 2011 were up 7.7% from 2010.

  • Total sales excluding autos for all of 2011 were up 7.3% from 2010.

  • Personal savings rate went down in 2011, falling to 3.7% from 5%.

Americans buying more, saving less — I see a trend here!

Plus this is an election year. That means it’s a safe bet we won’t see any tax increases; and the administration will do everything possible to cut unemployment, pump up the economy, and keep consumers spending.  

With that backdrop, I like the single-tenant, free-standing retail sector.

These are the REITS that have tenants such as convenience stores, full-service restaurants, and automotive parts stores. They’re the kind of places you probably shop at several times a month … to fill up your car, have a moderately priced sit-down lunch, or buy some wiper blades for the car.

National Retail Properties (NNN) is my pick. It’s well-diversified, with 1,298 properties in 47 states. Almost half of the holdings are in the south and southeast U.S.

The stock has returned an average of 11.4% a year over the past 3 years, for the period ending 9/30/11, including dividends. The returns and dividends have been slightly above the sector’s average.

And speaking of dividends, NNN is one of only 105 out of the more than 10,000 publicly-traded companies to have increased dividends for 22 or more consecutive years.

So starting this week keep your eye on NNN and the other REITs in my Index.

Best wishes,


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