Want More Income? Then These Securities Belong In Your Portfolio…

In an era of trillion-dollar deficits, inflation, and uncertain markets, nothing is more reassuring than durable hard assets that hold their value.

Gold has its luster… but no real utility or earnings power. That’s why many of the world’s richest and brightest people in business are sinking more wealth into real estate.

Property is a timeless investment. They’re not exactly making any more land, yet the world’s population is growing by 200,000 people (births minus deaths) each day. That’s over a million new people a week crowding into a fixed amount of space to live, work, and shop — placing upward rental pressure on housing, office parks, and retail strip centers.

The Smartest Investors In The World LOVE Real Estate

But don’t just take my word for it. Here’s what some of history’s wealthiest business tycoons had to say.

Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined.” – Andrew Carnegie.

“Buy land near a growing city. Buy real estate when other people want to sell.” – John Jacob Astor.

“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world” – Franklin D. Roosevelt.

Forward-looking investors put their money where their mouths are, placing huge bets on land and buildings.

Warren Buffett has strongly endorsed rental homes, and his Berkshire Hathaway company invested $377 million in a commercial property owner.

Billionaire media mogul Ted Turner owns over a dozen sprawling ranches from Oklahoma to Montana. This collection spans 2 million acres (more than twice the size of Rhode Island), making him one of the nation’s largest private landowners.

Sam Zell amassed a $5.5 billion fortune by investing in commercial office properties.

Liberty Media CEO John Malone scooped up 1 million acres of timberland in Maine. He recently surpassed Turner to become the largest private landowner in the U.S. (he also owns castles in Ireland, by the way).

REITs 101

Aside from generating stable monthly income, real estate can also be a great way to protect against the erosive impact of inflation and a depreciating dollar. Furthermore, its low correlation to equities can provide some buoyancy when the economy deteriorates and stocks are sinking.

Source: Nareit

Unfortunately, most of us don’t have the bankroll to buy an office tower, an apartment complex, or a retail shopping center. But real estate investment trusts (REITs) offer a great way for investors of any means to participate.

These publicly traded vehicles come in many flavors: apartment REITs, office REITs, industrial warehouse REITs, retail REITs, storage REITs, and healthcare REITs. Some even own cell phone towers or highway billboards – any asset that generates rental income.

If you’ve ever bought and sold a house, then you understand that most properties appreciate in value over time. But the primary appeal of these securities is their income-producing potential. And there’s a kicker. Real estate trusts are exempt from federal income taxes, provided they distribute at least 90% of their taxable income to stockholders.

That special perk helps explain why the average REIT offers an annual dividend yield of more than double the market norm.

Those dividends aren’t exposed to disruptive influences other businesses must deal with… such as spiking raw material costs or changing consumer fads. While companies like General Electric and toy maker Mattel have been forced to cut their dividends, most REITs maintain stable (or rising) distributions.

Keep In Mind…

There are a few caveats to consider.

Since REITs don’t pay corporate income tax, most of the dividends paid to shareholders are fully taxed as ordinary income. In other words, most REIT dividends don’t qualify for the reduced 15% dividend tax rate. Of course, investors can avoid taxes on these distributions entirely by holding REITs in a tax-advantaged account like a Roth IRA.

Furthermore, because they distribute most of their profits and retain little, these companies must frequently tap the capital markets to raise funding to grow their portfolios. A popular and cost-effective method to raise capital is through secondary offerings — selling additional shares of stock to the market. This typically weakens the price of existing shares (at least temporarily) and waters down earnings on a per-share basis.

Landlords in certain segments of the real estate world (mainly retail) have also struggled to collect the full rent due on their properties, with many tenants shut down (or operating at reduced capacity) because of the pandemic. But there have been sharp improvements in recent months.

Closing Thoughts

Overall, this asset class has been one of the best places to park your money over the long haul. Between dividends and share price appreciation, REITs have been one of the market’s best-performing asset classes over the past few decades.

We own several REITs in our portfolio over at High-Yield Investing. In fact, you’ll find two REITs in my Monthly Money Makers report…

Most investors don’t even know monthly dividend payers exist. So, I wrote this report with one goal in mind… To reveal my favorite 12 monthly dividend payers that you can use to build an income-generating portfolio.

Each monthly payer has a high yield and a track record of paying more and more each year.

Go here to learn more now.