High Yield Investment Trusts: Big Returns, Added Risk

Published Tue, 17 July 2012 23:30 CET by DividendYields.org

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 10.06
Medical Properties Trust 7.64
Health Care Reit 6.40

Articles featuring Omega Healthcare Investors (OHI):

This Dividend Stock’s 10% Yield Is Growing

A Growing 10% Yielder Today’s chart highlights another winner in the healthcare business, senior housing. Regular readers have heard our bullish argument on senior housing before. As the population gets older, we’re going to need more nursing homes, retirement communities, and long-term care facilities. This trend has represented one of the market’s biggest tailwinds over the past few years. Senior housing providers have delivered double-digit returns over the past... Read more

Top 2 Of 98 Dividend Achievers: Omega Health By Yield; TransMontaigne For Net Gains In March

Top 30 Dividend Achievers By Yield Represented 8 Business Sectors For March Yield (dividend / price) results from here March 12 verified by YCharts for thirty stocks from eight of eleven Morningstar sectors revealed the actionable conclusions discussed below. "The NASDAQ Dividend Achievers Index is made up of 265 stocks with 10+ consecutive years of dividend increases that meet certain minimum size and liquidity requirements. It is one of the better sources for high quality dividend... Read more

Omega's 9.7% Yield: Despite 5 Huge Risks, It's Worth Considering

Many of Omega Healthcare Investors' (OHI) operators (including Orianna, Signature, Daybreak, Preferred Care, and arguably Genesis and others) are increasingly unable to pay their rent, thereby forcing Omega to consider draconian rent concessions. And that's just one of the five huge risks Omega is currently dealing with. The others include a terrible regulatory environment, an over-hyped demographic wave and market cycle, massive macroeconomic headwinds, and a dividend coverage ratio... Read more

My Dividend Growth Portfolio - 42 Holdings, 5 Buys, 4 Sells

February was another busy month both for the broad market and for me as well. I've continued to transition my portfolio to having lesser individual holdings and having more of my portfolio be dividend ETF concentrated. This was my stretch goal for this year, in fact I wasn't even sure I wanted to move in this direction. For me, I've come around to the idea that I want to be more passively invested. The reasons are numerous but the recent bet by Warren Buffett and discussed at... Read more

5%+ Dividend Yield Portfolio: Bought The Dip (Feb. 2018 Review)

Outlook Volatility returned to the markets in February climaxing early in the month with the first 10% correction in years. In response, a record number of investors panicked and pulled $30.6 billion out of equity funds in one week (the largest ever amount of weekly based on records going back to 2004, according to analysts at Bank of America Merrill Lynch). However, within weeks, those losses had been largely trimmed and the month closed down about 5%. The only question that matters is:... Read more