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 6.64
Medical Properties Trust 6.15
Health Care Reit 4.50

Articles featuring Omega Healthcare Investors (OHI):

My 85 Stock Portfolio Evaluation Of Want To Buy Prices And Yields For Purchase - Includes BDCs And REITs

Investing should be done with peace of mind. Have a plan and use it. My plan is having a WTB List. With the recent volatility of the market, anxiety has increased in many investor's minds. I try to ride the wave of it all with my WTB list, it keeps me calm. I just updated my list and decided to share it. Now, it is not perfect and it only includes the stocks I currently own, all 85. It is my crutch and I use it often. I have found stocks to buy and have done so, along with trimming and... Read more

Dividend Update - August 2016

It's the end of one month and the beginning of another, so it's time for my favorite update: my dividend update. These dividend updates reflect all dividends that I receive through my investing pursuits. I hope they can help inspire you to take control of your own finances and invest to build a passive income stream. What you use that stream for is up to you, whether it's to fund early retirement, just provide some FI/FU money, or even to provide for an annual vacation. The key is... Read more

My 4% Dividend Yield Portfolio: Looking Forward To Add Digital Realty Trust

The employment report that was published last Friday was very aligned with the Fed's expectations. While the Fed's executives expected to see a job creation number that is above 100,000, the August indicator came in at 151,000. That means that the jobs indicator fits nicely with the Fed's expected trend, and therefore, there is a good chance that we would see an interest rate hike of 0.25 pts as early as mid-September. My personal perspective, which I expressed here in SA... Read more

5%+ Dividend Yield Portfolio: Outperformance Continues (Aug 2016 Review)

Review and Outlook August was a nothing sandwich for the markets with articles about the month appearing with titles like Eerily quiet: 38 days of near-silence for stocks Just how quiet is it? Well one particularly interesting graph shows that this is the lowest volatility reading in the last 2 years. Personally, I just don't think that the uninterrupted good times will last forever. However, I think the fundamentals of the economy are still strong, so I am not looking for... Read more

Dividends & Income Digest: Are You An 'Essentialist' Investor?

As we say farewell to long, lazy, warm days and get ready for the brisker weather and pace of Fall, I wanted to share with you a book that originally wasn't on my summer reading list, but came into my life just when I needed it. It's called "Essentialism: The Disciplined Pursuit of Less" by Greg McKeown. The concepts he discusses are deeper than I have the bandwidth to cover here, but as the book's name implies, the basic premise is "less, but better." In... Read more