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REIT preferreds: 3 high-yield dividend plays you can’t ignore

If you’re searching for yield, preferred stocks of real estate investment trusts (REITs) are worth a look here says Kiplinger’s Personal Finance in its April issue. According to the article on REIT preferreds, the 9%-12% yields on the preferred stock of some of the sector’s stronger players are too tempting to ignore.

Preferred shares of REITs have taken a hit along with the common stocks because of recession and credit fears, as well as likely forced selling by hedge funds – the effect of which may be magnified by the preferred shares’ illiquidity.

But the result is an opportunity to buy preferred shares of companies like Public Storage (PSA: 102.486 +0.08%, yld: 2.49%) and Health Care Property Investors (HCP: 36.63 -0.30%, yld: 5.05%) at a significant discount to par value (usually $25) and with double-digit yields well above the average historical spread of 4% above 10-year treasury notes (which are currently yielding under 3%).

One downside, the article notes, is that these returns are taxable as regular income (since most preferreds are treated as debt instruments and their dividends as interest).  On the other hand, the dividends are likely safe and unlikely to end up being paid in shares as has happened recently to many of the dividends of REIT common stocks.

The article mentions three REIT preferreds in particular:

  • Public Storage Series E preferred, which pays $1.69 annually, distributed on 3/31, 6/30, 9/30 & 12/31
  • PS Business Parks Series L preferred, which pays $1.90 annually, distributed on 3/31, 6/30, 9/30 & 12/31
  • Health Care Property Investors Series F preferred, which pays $1.78 annually, distributed on 3/31, 6/30, 9/30 & 12/31

I’ve recently been buying a variety of REIT preferreds, including all of the above, and am looking to accumulate more. I also own preferreds of Vornado Realty Trust (VNO: 85.79 -0.12%, yld: 2.71%), Kimco Realty (KIM: 15.515 -0.03%, yld: 3.48%) and Regency Centers (REG: 39.35 +0.28%, yld: 4.72%), as well as a couple of others.

Related posts:
REITs: Time to buy?

This entry was posted on Tuesday, March 24th, 2009 at 10:50 pm and is filed under High Dividend Stocks, Preferred Stocks, REITs. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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