Which REITs Are Worth Buying Now

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Includes: AGNC, NLY, O
by: Regarded Solutions

I have written quite a bit about Annaly Capital Management (NYSE:NLY), and I still maintain that it is the best of breed and fits nicely into just about any diversified and balanced portfolio, especially for those seeking higher yields (given the risks).

I thought I might also give some ink to several other REITs I believe to be favorable, given the risks REITs face these days. Of course I always look towards minimizing those risks inherent with REITs, so I tend to look at the company's business model, track record and performance, while also seeking a good return for taking on the risks.

Let me simply say that the Fed has already shown its hand when it comes to short-term rates, and unless they are flat-out misleading us, which I seriously doubt, short-term rates will be virtually zero for at least 2 years. None of us have a crystal ball, but I would say given the global mess, and the reservations about our own recovery in the US, we could see those rates this low for an even longer period. Remember, Bernanke said a minimum of 2 years, not a maximum.

The Two Other REITS I Like Best

Realty Income (NYSE:O)
Current Price: ~ $33/share
Yield: 5.2%

American Capital Agency Corp (NASDAQ:AGNC)
Current Price: ~ $28/share
Yield: 19.7%

Overview

O is a commercial REIT which owns and leases properties all around the nation, specifically to larger retailers who have many chain stores. I believe that given the business they are in, which has not suffered as badly as the residential home market, and the fact that they pay "only" a 5.2% yield right now, as the economy gains momentum, the consumer starts buying again, and retail in general picks up, O is positioned well to benefit from a recovery than many of its peers.

I also really like the monthly dividend and they just gave their 497th monthly dividend in a row (read this press release), without missing one. Now that is a track record, folks -- and worth my time to see if it fits into my portfolio, even with a 5.2% yield (in the world of REITs, it is small for sure).

AGNC is an mREIT (agency REITs have an advantage over non-agency REITs in the residential MBS market) and has performed very well recently (here is the most recent 10Q) by using more leverage. They have been going further out in time, for higher returns now, something that NLY has avoided to maintain its conservative approach. However, given that AGNC has been able to manage the leverage thus far, they have also been able to have greater income and offer a wonderful yield of 19.7%

I am not sure how long they will be able to maintain this strategy, but as of now, the proof is in the bottom line. Enough proof for me to take a long hard look at adding this one to my portfolio.

My Opinion

I have owned NLY for quite some time, and I intend on holding it; however, I would not be doing myself any favors if I continued to ignore other REITs that are attractive, well managed, and have a strong track record. I believe that both O and AGNC might fit nicely in my personal portfolio, as well as yours.

Disclosure: I am long NLY, and I will probably be taking a position in at least one of the aforementioned stocks next week.

Disclaimer: Please understand that there are risks and headwinds for all REITS right now (read this to review the risks), and while I might like these stocks for myself, you must do your own research, as well as understanding your own risk tolerance, prior to making any decision on these or any other stocks for that matter. My opinions are just that -- opinions -- which I offer to you for your consideration.