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,

George