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4 REITs for Steady Returns Amid Flaring Volatility


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The U.S. presidential election has historically pushed up stock market volatility and we see no respite from it this time either. In fact, standing six weeks ahead of the election, several political experts’ forecasts now seem challenged with candidates appearing neck-and-neck.

Amid all these, volatility is indeed spiking. The fear-gauge CBOE Volatility Index (VIX) flared up by 18% on Monday to settle at 14.50. In the days to come, this swing is expected to continue with debate season heating up and the race getting tighter.

If this is not enough, we also have Fed-induced uncertainties that are well adding fuel to market volatility. In fact, despite calming the nerves of stock market participants with a steady rate stance this month and pulling down rate expectations for the years ahead, the Fed has pretty much kept alive the chance of a rate hike this year, with its acknowledgement of a pickup in economic growth. It is, however, gathering “further evidence of continued progress toward its objectives” before making the call. (Read: Fed Holds Off Rate Hike for Now: Top 5 Gainers)

Apart from this, volatility in oil prices has sworn not to mellow down. On the one hand, Noureddine Bouterfa, the oil minister of Algeria, kept hopes afloat of fixing a production limit in the meeting this week. On the other hand, Saudi Arabia officials anticipate that such a pact will fail to occur. (Read: 5 Oil Stocks to Buy as Output Freeze Hopes Rise)

How to Brave the Blues?

No doubt, market volatility is unavoidable. But for an investor, weathering this instability is of prime importance. Rather than distancing oneself from the market or waiting on the sidelines, braving this market volatility would indeed be a smart move. This might appear a daunting task at first, but an apt strategy would be to resort to income investing. Then also, the chosen stocks must be consistent performers. This is because the long-term value of a company is not affected by short-term instability.

Why Bet on REITs?

Speaking on income investing, the dividend aspect of a stock is crucial. Dividends are by far the biggest enticement to invest in REIT stocks because they offer stable income with a good inflation upside shield. In fact, as of Jul 29, the dividend yield of the FTSE NAREIT All REITs Index was 3.73%, which clearly outpaced the 2.13% dividend yield offered by the S&P 500 as of that date. Over long periods too, REITs have outperformed the broader indexes with respect to dividend yields.

So, here we have handpicked four REITs that have high dividend yields. On top of this, these stocks have been holding up well. Plus, their favorable Zacks Rank #2 (Buy) implies that they are witnessing positive estimate revisions. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MFA Financial, Inc. (MFA - Snapshot Report) operates as a real estate investment trust primarily engaged in the business of investing in mortgage-backed securities.

The company has exceeded the Zacks Consensus Estimate in three of the last four quarters and matched expectations in the other. It has an average surprise of 6.87% and dividend yield of around 10.65%.

Arbor Realty Trust Inc. (ABR - Snapshot Report) is a specialized real estate finance company investing in real estate-related bridge and mezzanine loans, preferred equity, mortgage-related securities and other real estate-related assets.

The company has been a consistent performer, having beaten the Zacks Consensus Estimate in three out of the trailing four quarters, with an average surprise of 32.3%. It has a dividend yield of 8.58%.

Omega Healthcare Investors Inc. (OHI - Snapshot Report) invests in income-producing health care facilities, principally long-term care facilities, with the objective of profitable growth and further diversification of the investment portfolio. The company is based in Hunt Valley, MD.

A steady performer, Omega Healthcare surpassed the Zacks Consensus Estimate substantially in each of the past four quarters, with an average surprise of 4.74%. The dividend yield of the company is 6.58%. The stock enjoys a current cash flow growth of 31.66%, which is well ahead of the industry average of 15.84%. Also, projected sales growth is 18.84% compared with the industry average of 5.34%, which is encouraging.

Senior Housing Properties Trust (SNH - Snapshot Report) is a Maryland-based real estate investment trust that invests in senior housing income producing real estate, including senior apartments and assisted living, congregate care and nursing home properties.

Senior Housing Properties exceeded the Zacks Consensus Estimate in three of the last four quarters and matched our expectations in the other. It has an average surprise of 1.61% and a dividend yield of 6.63%.

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