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This is my take on the direction of interest rates and their effect on REIT prices. I don't think that the Fed will aggressively raise rates. I believe that it will be a token increase now and a bigger one after the 2016 elections. If they aggressively raise rates now, the post modern economy will collapse, it's that fragile. And the politicians will be up in arms. So don't worry about interest rates.
If you are looking for high yields and stock price appreciation, I'd recommend limited partnership shares in oil, gas and coal. The collapse in energy prices has caused those partnership shares to tank. For example, National Resource Partners (NRP) has a current payout yield of about 14% and the shares are incredibly cheap due to Obama's war on coal.
Contrarian investing is always better than running with the crowd.
THE FED is not controlling the bond rates . investors are and so far they have been driving rates higher
I don't want your newsletter, lol. My point was not everyone is in the phase you are in, so just because it doesn't make sense for you doesn't mean it doesn't make sense for others that want exposure to a different sector at a time where prices may be more attractive than they were before.
Again yields on high quaility REITs can only go so high before people will start seeing them as good investments. If the yield on O is 5 and the 30 year treasury is 3.5% O will likely drop, why take exposure for the extra 1.5%? But when O drops to a yield of 6.5% and the 30 year is 3.6% money will likely start flowing back in again. That is the good thing about high quality REITs they have a floor. A 15% drop puts most of them in a situation where a much further drop would put these yields in the 8-9% range. If it is a bad company that's a terrible investment, but if it is a good company that is a great investment.
The bottom line is you can't really know, you can guess, but you can't know. For you, thinking short term, you are probably right, the exposure is not worth the risk. What I am trying to drive home to you is that people have different time horizons, which means they may be willing to take different risks. All of your advice is based off of YOU or someone your age. If you caveat that when you give advice that's fine, but you state your opinion as if it is expert and applies to everyone regardless if they are investing at 20 or at 75.
I am in my 20s and am staying totally out of REIT's too, because the price to book ratios are in the stratosphere. I'll consider getting in later, but they need to return to the troposphere first!
for REIT's, P/E ratios are generally not the preferred metric for analysis. Most people I know who actually work in that industry reference FFO (Funds from operations) as the important metric to pay attention to.
for REIT's, P/E ratios are generally not the preferred metric for analysis. Most people I know who actually work in that industry reference FFO (Funds from operations) as the important metric to pay attention to.
I invest for income. Hard to beat O for that. In July of 2013 bought about $20,000 worth. I've been reinvesting the dividends. My first monthly dividend was $81.88. My Jun 15th dividend is $93.71.
Stock price goes up, stock price goes down....whatever. The income keeps coming in and slowly increasing.
look at your total return , that is all that counts. reinvested dividends are not growing a thing by themselves . it has been explained why not many times.
if you don't reinvest the dividends it is like taking money out . if you do reinvest there is no advantage from the reinvesting as far as your total value .
all that counts when it comes to compounding is the total dollars being compounded.
you never get paid to wait, that is a myth and lack of understanding of how dividends work.
gains are based on your starting value each quarter and compound off the dollar value of your investment..
those who don't get it think reinvesting when markets are down gives them more shares that are doing something extra for them but the value before and after payment is pretty much the same if you reinvest.
being at the starting gate each quarter with more shares at a lower price is the same value as less shares at a higher price. when the opening bell rings market action takes them off and running for the next quarter with the same starting value.
sec rules have the exchange computers adjusting the share price downward by the same amount as the dividend . your money available for compounding is no different the night before the adjustment as it is after the reset.
if you do not reinvest than the amount you have available for compounding is reduced by the same amount as you got paid at the start of the quarter. in any case what you had in value before you got paid is what you have in value after. either you have less dollars compounding and a dividend in pocket or more shares at the same dollar value compounding if reinvested.
gains are compound off starting and ending values each quarter or yearly if you want to figure that way.
what percentage of dividends and capital appreciation that return is made up of doesn't matter.
a 9% average return whether 9% capital appreciation or 6% capital appreciation and 3% reinvested dividend has the same value in either case.
wouldn't it be great if we could just profit buying right before the dividend is paid out. dividends are not the same as interest which gets added to principal. dividends are just a shifting around in make up of the dollars already existing in share value..
whether they are good investments or poor investments are another issue but certainly getting paid to wait is not one of them.
do not confuse rebalancing or adding money when things are down with reinvesting dividends when they are down. they do not accomplish the same thing since rebalancing is committing more dollars available for compounding to an investment the same as adding money to it would.
Last edited by mathjak107; 06-14-2015 at 03:13 AM..
I invest for income. Hard to beat O for that. In July of 2013 bought about $20,000 worth. I've been reinvesting the dividends. My first monthly dividend was $81.88. My Jun 15th dividend is $93.71.
Stock price goes up, stock price goes down....whatever. The income keeps coming in and slowly increasing.
What did you buy?
I love this ad for Fidelity btw:
"A one-year membership gives you access to all these features for just $159. That's under $11 a month, probably less than you spend on coffee for a week!"
That reminds me.....
"And for less than the price of a cup of coffee, you can feed the children! Please call. You have nothing to lose and everything to gain."
The central banks telegraph the asset purchase programs well in advance to allow the banks and other investors to drive up bond prices and push down interest rates in anticipation. The ECB QE program must've been announced nearly a year in advance of its formal adoption by the central bank. It should be no surprise then that interest rates rise now as the private parties are now unloading their holdings when they have a buyer. Add to that the Fed's preannouncing the next rate hike and you see the same anticipatory movements in bonds. They would probably be moving faster if not for the purchase programs in Europe and Japan.
As of now, the odds of a September rate hike is about 50%. December's probability is 70%.
"A one-year membership gives you access to all these features for just $159. That's under $11 a month, probably less than you spend on coffee for a week!"
That reminds me.....
"And for less than the price of a cup of coffee, you can feed the children! Please call. You have nothing to lose and everything to gain."
The symbol is O. Company name is Realty Income Incorporated. Founded in 1969, they went public in 1994. They have never cut their dividend. Since 1994 they have increased in 80 times, including 70 consecutive quarterly increases. (quarterly increases are typically very small, followed by a yearly "normal" increase).
They pay monthly.
Since I have been not spending my income, but reinvesting it back into O, every month I buy about 2 new shares of O. That's why my monthly income from my $20,000 investment has gone from $81.88 a month to $93.71 a month in less than 2 years.
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