Reasons to Buy Dividend Stocks When Interest Rates Rise

The shares of real estate investment trusts (REITs) like Realty Income (NYSE: O), Avalon Bay (NYSE: AVB), and HCP (NYSE: HCP) have been struggling of late because of concerns that interest rates are set to head higher sooner rather than later. Rising rates aren't as bad as some believe for property owners, however, and that could spell a great buying opportunity -- but only if you're ready.

1. Hard assets - Interest rates remain near historic lows, artificially held there by the Federal Reserve.
2. Lease renewals - REITs regularly raise rents.
3. Cheap debt - Another interesting feature of REITs is that, like other companies, they have been locking in low rates by issuing debt.

There's little doubt that REITs will hit the skids when the Fed starts raising rates. However, that could actually be a great buying opportunity for contrarian minded investors. The underlying dynamics of the sector suggest that any impact REITs feel on the business side will be short-lived. And that's why a sell-off could be a great long-term buying opportunity.

Source: Motley Fool

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