High Yield Investment Trusts: Big Returns, Added Risk

Published Tue, 17 July 2012 23:30 CET by TopYields.nl

If the old adage “you can catch more flies with a spoonful of honey than a spoonful of vinegar” is true then it is evidenced in the world of high yield investments. Investment trusts and closed end investment funds often offer higher yields then traditional stocks and other safe haven investments in an effort to attract investors. This is because these investments also come with an elevated amount of risk, the extra income is the “honey” attracting investors. In order to successfully invest in high yield trusts an extra amount of due diligence is required. Knowing how and why a trust is making money can help you avoid potentially bad investments.

Real Estate Investment Trusts, which got a lot of attention during the US financial crisis, are another avenue for high yield returns. These investment funds invest, own or manage real estate and can have a narrow or wide focus. The primary source of income for these funds is rental income from managed properties. These funds can be very sensitive to interest rates and economic conditions because of the heavy debt loads they carry. However, at this time interest rates are at or near all-time lows, helping REITs in more ways than one. Not only are they able to reposition their debt in lower interest rate loans they are also in better position to compete against treasury bonds and other safe havens whose yields have been falling.

Within the world of real estate investing there are some good and bad sectors. One sector with an especially bright future is health care. Health care is one of the largest industries in America and one of the fastest growing. REITs investing in this sector has the added bonus of a strongly growing industry to support it. Health Care REIT (NYSE: HCN) is one fund producing a good return. The REIT pays a dividend of $2.96 (4.9% at the current levels). Health Care REIT Inc, invests in diversified properties throughout the health care sector. The company has a history of solid revenue growth and pays a healthy dividend. Despite low profit margins the fund's history of cash flow and steady earnings make it an attractive candidate.

Another strong REIT, Omega Healthcare Investors (NYSE: OHI), invests in long term care facilities. The company owns and manages over 400 facilities throughout the United States. The company also provides leases and mortgage financing to operators of long term care facilities. Omega pays a dividend of $1.68 (7% at the current levels) and is another attractive REIT for dividend investors. The company has been in business for over 20 years, producing steady earnings and often beating Wall Street estimates.

Health REIT Dividend Yields Table
Medical Properties Trust (NYSE: MPW) is a an Alabama based REIT investing in hospitals, acute care centers and single-focus specialty care centers such as heart or cancer treatment centers. The trust yields $0.80 annually (8% at the current level) and has a good history of payments. The stock is thinly traded, less than 1 million shares daily, but has a high institutional investment ratio at over 70%. The company has been growing its portfolio aggressively and should continue to provide growth as well as dividends into the future.

Stock name Dividend Yield
Omega Healthcare Investors 7.17
Medical Properties Trust 6.27
Health Care Reit 4.87

Articles featuring Omega Healthcare Investors (OHI):

How The Yield On Cost Can Be Misleading

For periods of time, the yield on cost ("YOC") has been used as one of the favorite metrics in the Dividend sections of Seeking Alpha. However, it can be misleading. How do you use the yield on cost metric? A common usage of yield on cost is to illustrate how a quality company has consistently increased its dividend over time. I acknowledge that the YOC is great for showcasing that. Amgen example If you invested in Amgen (NASDAQ: AMGN) five years ago, you would have... Read more

Big Dividend REITs: Ranking The Best And Worst

It's been a choppy year so far for big-dividend Real Estate Investment Trusts (REITs). This has created some attractive buying opportunities as the market moved from January/February distress, to a near-infatuation with yield in the months that followed, a Brexit-induced flight to quality, a new real estate sector, and perhaps another leg lower following the upcoming November 1-2 Federal Reserve meeting. For your consideration, we've provided a ranking of the best and worst performing... Read more

Dividend Growth Investing To Fill-The-Gap

Filling The Gap With Dividend Growth Investing Subscribers to "Retirement: One Dividend At A Time" got an early look at this material and receive instant text message trade alerts which often produce lower entry price points and higher yield and income. Please share in the comment section ways you have evolved to the type of investor you are today, dividend growth investor or not. Over the several years I've written for Seeking Alpha, many readers and subscribers have... Read more

My Third Quarter Portfolio Review - Focus On Dividend Growth And Quality

I am pleased to present my 3rd Quarter 2016 portfolio review. Portfolio reviews are conducted each quarter per our business plan and help further clarify our approach to income investing. This review should be read as representing an approach that best matches our personal risk tolerance. As I continue to highlight actions taken, keep in mind that all my holdings are in non-taxable accounts. My portfolio finished the quarter with 48 holdings yielding roughly 4.2% at today's cost.... Read more

7 Dividend Increases: October 10-14, 2016

I monitor dividend increases for stocks on my watch list of dividend growth stocks to identify candidates for further analysis. Companies that regularly increase dividends show confidence in the potential growth of future earnings. This week, 7 companies on my watch list announced dividend increases, including 1 of the stocks I own. The following table presents a summary. The table is sorted by percentage increase, %Incr. Dividends are annualized and in US$ unless otherwise indicated. Yield... Read more