This is the kind of market turbulence I love. The REIT markets have taken another downturn and some good companies are going down with the ship. The news of S&P's downgrade of subprime debt sent the entire REIT market in a tailspin. Some of these companies will deserve the price reduction, but this is when the psychology of the markets tends to beat down even some of the better players in the field. Take a look at iStar Financial (NYSE: SFI) as a good example. SFI is a large diversified financial service company specializing in high-end custom commercial real estate financing.
Things I like about SFI
They are more fiscally conservative and use less leverage than most of their peers in the industry, they have a dividend yield of over 7%, they have increased their dividend over 5% annually for 5 years in a row and they have increased diversification to other financial markets for better risk-adjusted returns.
They have increased exposure to more risky residential lending, increase in interest rates could slow down the commercial real estate market and there will most likely be additional bad news out of the subprime lending industry.
There could be some more dips in the coming months and it is hard to say when the bottom will hit for the REIT market but long term investors will find some great bargains this year. Dividend and value investors may want to start accumulating shares of SFI on these dips. I just love a sale.
Disclosure: The Div Guy owns shares of SFI
SFI 1-yr chart