The Case For Buying REIT Preferreds

by REIT Wrecks on August 12, 2008

If you’re thinking about buying pref shares, here it is in a nutshell: Commodity prices are now way down and the dollar up, which may afford room for yet another Fed rate reduction. Because they sit a notch higher on the capital stack, combined with historically high spreads over the current 10 year UST, preferreds are not only a little safer than the common (provided you don’t mind much lower liquidity), but also a good value play.

Consequently, they make a good, lower-beta alternative to the higher risk of capital erosion and possible dividend cuts in REIT common stocks, with additional potential upside courtesy of Uncle Ben:

With respect to AVB and ESS specifically (the two picks highlighted in the vid), see the March REIT Wrecks post entitled “Play Subrime Safely With These Residential REITs”.

See also REIT Definition for more information on the payout of common dividend. Scroll down for more REIT and real estate related news, resources and links.

Click here for a list of Apartment REITs
Click here for a list of Hotel REITs
Click here for a list of Industrial REITs
Click here for a list of Mortgage REITs
Click here for a list of Office REITs
Click here for a list of Retail REITs

Information on how REITs work can be found in the post REIT Definition.

REIT Stock Dividends

Disclosure: None at the time of this writing.

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