The REIT Way To Sleep Well At Night

James A. Kostohryz is a leading "macro economic" writer and investor and his articles are generally aimed to provoke thought on certain "harbinger risks" and how to deal with the most important element of investing: the future. He summed up his thesis on the prospects for dividend-oriented stocks in the next couple of years: "It is currently my view that despite their recent correction, dividend yield-oriented stocks are relatively unattractive and will remain so for at least a couple of years. In a stock market bubble scenario, these stocks will underperform. In virtually all other scenarios, absolute total returns for these stocks are likely to be modest to negative."

Now as most know, I write about a more specialty equity sub-sector better known as Real Estate Investment Trusts (or REITs). In all fairness, Kostohryz did not even mention REITs in his latest article but I decided I would open the sector for discussion. As I responded: "Respectfully I wanted to add my ten cents on REITs. As you know, REITs are often mis-characterized as being somewhere between a bond (fixed income) and a non-REIT stock, as you know, they are neither. Remember that in a rising interest rate environment there is a general improvement in economic conditions, so as rates go up it drives rent growth. Since the great recession we have seen very little rent growth and so that means that when rates do rise it validates the fact that REIT dividends will continue to rise."

Source: Seeking Alpha

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