One of the great things about being a value investor is that
you can gain an edge over the market timers or the Index fund buyers. By paying
close attention to profit margins, a value investor can seek to avoid painful
losses by focusing on high-quality companies that have a strong record of
dividend growth.
Most REITs have become cheaper year-to-date as a result of
the fear of rising rates. There is no doubt that they (REITs and Rates) are
correlated, but the reality is that REITs thrive in an environment when rates
are modestly increasing.
By extension, some of the most attractive buying
opportunities in REITs have resulted when investors erroneously drove down REIT
share prices because of rate increases.
More importantly, investors shouldn’t simply go out and load
up the truck on REITs that offer high-dividend yields. You must first consider
the safety of the dividend the ability for the dividend to grow , and the
overall merit of the REIT itself. As Benjamin Graham explained (The Intelligent
Investor),
“The defensive
investor must confine himself to the shares of important companies with a long
record of profitable operations and in strong financial condition.”
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