How important are dividends to a stock investor’s profits?
Speaking before the Financial Industry Regulatory Authority
(FINRA) on October 15, 2007, investing guru John Bogle laid out the case:
“Over the past 81 years… reinvested dividend income
accounted for approximately 95 percent of the compound long-term return earned
by the companies in the S&P 500. These stunning figures would seem to
demand that mutual funds highlight the importance of dividend income.”
So in other words, dividends are pretty important! Of
course, right now the average stock on the S&P 500 is only paying about a
2% dividend yield, which isn’t a lot. If you want to do better than that,
though, the REIT sector is a great place to begin your search for high-yield
dividend stocks.
REITs are companies that acquire, own, operate, and manage
real estate portfolios, usually some combination of residential or commercial
real properties, or their associated mortgage loans and mortgage-backed
securities. Tax law requires that these companies return profits directly to
shareholders, and most of them choose dividends as their vehicle of choice for
compliance, resulting in frequent high dividend yields across the sector.
The slowly ebbing COVID pandemic was hard on real estate
managers, as tenants had trouble making rents and owners had trouble leasing vacant
space. However, BTIG analyst Tim Hayes believes there are reasons to stay
bullish on CRE properties specifically.
"While we recognize the headwinds to commercial real
estate (CRE) fundamentals and the potential risk to equity/earnings power, we
believe there are several reasons to be constructive, especially with the
sector trading at a discount to historical levels and offering attractive
dividend yields at wide spreads to benchmark rates," Hayes commented.
Against this backdrop, we’ve opened up the TipRanks database
to get the latest stats on Hayes’ CRE choices. These are stocks that the
analyst initiated Buy ratings on, pointing out their high dividend yield. We
are talking about at least 9% here.
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