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As I wrote in the past, there is a strong case to be made that REITs will underperform stocks. Dividend yields are below average and growth is not likely to be strong. However, I also wrote that there would be opportunities in individual REITs, and I decided to highlight a few for investors considering the REIT market. Since I don't think that REIT are a great investment right now, I am not only taking a look at a few that I think will outperform, but also at one that I think will underperform.

Two REITs to Consider

To find these REITs, I screened for a low debt to equity ratio and rising dividends. I then looked for a combination of high dividends, low valuations, and high profitability.

Senior Housing Properties Trust (SNH)

Senior Housing Properties Trust (SNH) is a real estate investment trust which owns independent living and assisted living communities, continuing care retirement communities, nursing homes, wellness centers, and medical office, clinic and biotech laboratory buildings located throughout the United States. All of its properties are triple net leased, meaning that each tenant pays rent, and is also responsible for paying all operating costs, taxes, insurance and maintenance costs that arise from the ownership and use of its property.

SNH was created by CommonWealth REIT (CWH) in 1998 and spun out to CWH's shareholders in 1999 as a separate publicly traded REIT on the New York Stock Exchange.

  • Dividend Yield: 6.5%
  • 5 Year Dividend Growth Rate: 2.56%
  • Payout Ratio: 161.04%
  • Price to Book: 1.5
  • Total Debt to Equity: 58.89%

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Getty Realty Corp. (GTY)

Getty Realty Corp. specializes in the ownership and leasing of service stations, convenience stores and petroleum distribution terminals in the United States. It provides financing to the petroleum and convenience store industries for acquisitions, site upgrades and refinancing through its sale/leaseback and net lease financing programs. Getty Realty Corp. owns or leases approximately 1,110 service stations and convenience store properties and nine petroleum distribution terminals in twenty-one states.

  • Dividend Yield: 6.95%
  • 5 Year Dividend Growth Rate: 2.14%
  • Payout Ratio: 108.44%
  • Price to Book: 2.62
  • Total Debt to Equity: 19.76%

...And One to Pass

FelCor Lodging Trust Incorporated (FCH)

FelCor Lodging Trust Incorporated (FelCor) operates as a real estate investment trust. The company is the sole general partner of, and the owner of a greater than 99% partnership interest in, FelCor Lodging Limited Partnership, through which it holds ownership interests in 85 hotels with approximately 24,000 rooms at December 31, 2009.

This REIT has a high and rising debt ratio and currently does not pay a dividend. In addition, it is trading at a high price to book ratio. All of this means that FCH cannot be counted on.

  • Dividend Yield: N/A
  • 5 Year Dividend Growth Rate: N/A
  • Payout Ratio: N/A
  • Price to Book: 3.67
  • Total Debt to Equity: 234.73%

Source: Are REITs a Good Investment? Two to Consider, One to Skip