Protected Principal Retirement Strategy: Is It The Right Time For REITs?

by: Akaralph

I have always loved equity REITs. I have to say, I am a big follower of both Brad Thomas and Dane Bowler; they provide pretty sound advice on the REIT sector.

It has been unfortunate that I sold my equity REITs some time ago, but in recent weeks, many of those that I watch have declined in value, and consequently, have increased in yield.

Over the past year, the Protected Principal Retirement Strategy portfolio's equity REIT holdings were limited to a position in Alpine Global Premier Properties (NYSE:AWP). I purchased it in the high $5s and sold in the low $8s. The $.60 annual dividend didn't hurt either.

REIT Watch List

I presently watch the following REITs very closely.

Hospitality Properties Trust (NYSE:HPT) - Yields 7.2%, Dividend has been increased recently to $.47 quarterly, FFO covers the dividend.

Medical Properties Trust (NYSE:MPW) - Yields 5.8%, No recent dividend increase, FFO covers the dividend.

Omega Healthcare Investors (NYSE:OHI) - Yields 5.9%, Four recent dividend increases, FFO covers the dividend.

One Liberty Properties (NYSE:OLP) - Yields 6.4%, Dividend has recently been increased, FFO covers the dividend.

Senior Housing Properties Trust (NYSE:SNH) - Yields 6.0%, Dividend has recently been increased, FFO covers the dividend.

UMH Properties (NYSEMKT:UMH) - Yields 6.7%, No recent dividend increase, FFO covers current dividend.

Monmouth Real Estate Investment Corporation (NYSE:MNR) - Yields 6.1%, No recent dividend increase, FFO covers the current dividend.

In addition to these, I have been following both Wheeler (NASDAQ:WHLR) and Whitestone (NYSEMKT:WSR). First quarter 2013 earnings FFO did not cover the current quarterly dividend, so I have moved them both down on my list.

REIT Closed-End Funds

There are only a few REIT closed-end funds [CEFs] that I continue to follow. Nuveen Real Estate Income Fund (NYSE:JRS) has always been a favorite of mine; however, it rarely sells at a discount to net asset value [NAV]. For a few days in June, JRS dipped to the point where it sold at a slight discount to NAV, and I was able to purchase a few hundred shares for the Protected Principal Retirement Strategy portfolio.

JRS presently trades at a 9 percent premium to NAV. The quarterly dividend was increased from $.23 to $.24 in March 2013, and it yields

8.22 percent at the current stock price. It has appreciated 16 percent year-to-date and positions include 58 percent equity REITs and 35 percent REIT preferred stocks. Holdings are 98 percent in U.S. REITs. JRS' fees are a bit high at 1.9 percent.


At this point, I believe that REITs might still be vulnerable to correction, at least over the short term. With that in mind, I continue to watch JRS for a dip into discount-land, at which point, I will endeavor to add additional shares to the Protected Principal Retirement Strategy portfolio.

As far as individual REITs go, my preference would be to eventually establish long positions in UMH, SNH, OHI, and possibly HPT over the next quarter or so.

Disclosure: I am long JRS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: This article does not constitute either a buy or sell recommendation for any of the stocks mentioned.