One type of investment that’s typically shunned in a rising interest rate environment is real estate investment trusts, or REITs. That’s because higher rates mean higher borrowing costs — literally the price of doing business for REITs — which can weigh on returns for investors. Also, as rates move higher, lower-risk fixed-income investments, including Treasuries, become attractive again. But not all REITs are created equal. Many can withstand the higher rates because the rising rates usually accompany an improving economy, which in turn is good for business.  And lest you think real estate is only condos and office buildings, say… Read More

One type of investment that’s typically shunned in a rising interest rate environment is real estate investment trusts, or REITs. That’s because higher rates mean higher borrowing costs — literally the price of doing business for REITs — which can weigh on returns for investors. Also, as rates move higher, lower-risk fixed-income investments, including Treasuries, become attractive again. But not all REITs are created equal. Many can withstand the higher rates because the rising rates usually accompany an improving economy, which in turn is good for business.  And lest you think real estate is only condos and office buildings, say hello to Crown Castle International Corp. (NYSE: CCI), the largest provider of shared wireless infrastructure in the United States. Crown Castle is dominant in a sector where barriers to entry are high and the threat of excessive supply is minimal. It’s also in a position to improve its business standing because demand for its properties is growing.  And the good news for investors is that Crown Castle recently committed to increase its dividend — good news in any kind of market, but especially in this dividend-starved one.  And because it’s a REIT, which means it has to distribute at least… Read More

It wasn’t a surprise that the U.S. Federal Reserve didn’t hike interest rates its July meeting.  The Fed already hiked short-term interest rates twice this year, raising rates by a quarter percentage point in March and again in June.  After years of near-zero interest rate policies, the benchmark rate has now been hiked to a range between 1% and 1.25%. Of course, rates are still low by any historical measure. But they are significantly higher than just a year ago. Also important is the speed with which short-term interest rates have increased over the past year. The two charts below… Read More

It wasn’t a surprise that the U.S. Federal Reserve didn’t hike interest rates its July meeting.  The Fed already hiked short-term interest rates twice this year, raising rates by a quarter percentage point in March and again in June.  After years of near-zero interest rate policies, the benchmark rate has now been hiked to a range between 1% and 1.25%. Of course, rates are still low by any historical measure. But they are significantly higher than just a year ago. Also important is the speed with which short-term interest rates have increased over the past year. The two charts below show how fast a three-month Treasury note rate and a one-year rate have jumped:  3-Month Treasury  1-Year Treasury Unfortunately for income investors, these rate increases are being felt especially in closed-end funds, or funds that issue a fixed number of shares and can also borrow in order to enhance dividends and returns.  The mechanism is quite simple. Higher short-term rates are making the cost of leverage more expensive. And because many closed-end funds use leverage to enhance returns and dividends, the costs for these closed-end funds are also going up.  —Recommended Link— Why The… Read More

If you fly for business or pleasure, you know that buying a plane ticket has almost become an art form.  And when it comes to your final ticket price, it turns out that when you buy may matter more than where you fly.  According to Cheapair.com, the average fare difference between the best day to buy your airline ticket and the worst is more than $200 — and that’s not counting the premium fares you’ll see if you’re purchasing a ticket within seven days of travel.  That’s because airlines don’t have a fixed ticket-price system. They change fares constantly, as… Read More

If you fly for business or pleasure, you know that buying a plane ticket has almost become an art form.  And when it comes to your final ticket price, it turns out that when you buy may matter more than where you fly.  According to Cheapair.com, the average fare difference between the best day to buy your airline ticket and the worst is more than $200 — and that’s not counting the premium fares you’ll see if you’re purchasing a ticket within seven days of travel.  That’s because airlines don’t have a fixed ticket-price system. They change fares constantly, as their goal is twofold: sell the most tickets for every flight (a goal best achieved with lower fares) and maximize the total amount received (a seemingly contradictory goal best achieved with higher ticket prices).  —Sponsored Link— Were You Born Before 1969? See if you qualify for Reagan’s secret 702(j) Retirement Plan. It could pay you $2,194 a month, tax-free… Learn more. Introducing: Revenue Management Instead, airlines utilize a system called “revenue management” — a process that looks at consumer demand patterns and the company’s business trends to ultimately determine best… Read More

So far, it hasn’t been a very good year for real estate investment trusts (REITs).  However, this isn’t to say these stocks have performed badly as a whole.  So far this year, the Dow Jones Equity REIT Total Return Index is up about 3.8%. Even though it’s less than the return of the market — the S&P 500 index is up more than 13% over the same period — these aren’t the numbers to really complain about. Especially in the context of this market environment. As we move a little more than six months into the year, the U.S. Federal… Read More

So far, it hasn’t been a very good year for real estate investment trusts (REITs).  However, this isn’t to say these stocks have performed badly as a whole.  So far this year, the Dow Jones Equity REIT Total Return Index is up about 3.8%. Even though it’s less than the return of the market — the S&P 500 index is up more than 13% over the same period — these aren’t the numbers to really complain about. Especially in the context of this market environment. As we move a little more than six months into the year, the U.S. Federal Reserve has already hiked interest rates twice — something that many had anticipated would trigger a REIT sell-off.  So, the good news is that the sector and its investors are taking the rate hikes in stride — so far, at least. But bad news is hiding in plain sight. The performance among REIT subsectors has been widely divergent, as the sector’s investors sold off stocks impacted by some of the major economic shifts. I’m talking about the retail business, the big changes that this industry faces, and the subsequent reaction of the market.  According to REIT.com, the weakest two sectors… Read More