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 6.93
Health Care Reit 6.40
Medical Properties Trust 5.36

Articles featuring Omega Healthcare Investors (OHI):

Omega Announces Quarterly Common Stock Dividend

Omega Healthcare Investors, Inc. (NYSE: OHI) today announced that the Company’s Board of Directors declared a common stock dividend of $0.66 per share. The common stock dividend is payable Thursday, August 15, 2019 to common stockholders of record as of the close of business on Wednesday, July 31, 2019.... Read more

This 7.4%-Yielding Portfolio Will Survive A 2008 Repeat

Co-produced with Samuel Smith for High Yield Landlord With the economic outlook growing increasingly uncertain, we are slowly but steadily taking steps to ensure our real money portfolio at High Yield Landlord is prepared to face the next market downturn. While we are not market timers in the sense that we remain fully invested, we believe that maintaining a disciplined long-term approach and avoiding the urge to be overly aggressive in chasing every high yield, undervalued opportunity that... Read more

PepsiCo: Solid Hold For This Dividend Aristocrat With Good Income And Total Return

PepsiCo (PEP), one of the largest manufacturer and distributor of snack food and beverages, is a Hold for the dividend investor and total return investor. PepsiCo has steady growth and plenty of cash, which it uses to buy bolt-on companies, increase the dividend each year, and buy back shares. Even with an earnings beat in the last quarter, Mr. Market did not like it. I think this is an opportunity to buy a great defensive company if you do not have a position in the company. PEP is 0.6% of The... Read more

Omega Healthcare Investors Inc: This High Dividend Stock Yields 7%

Miss This High Dividend Stock and You’ll Kick Yourself Later The media has started to catch on to “the high dividend stocks you’ve never heard of.” Last year, I urged readers to check out a little-followed stock market niche. Investors by and large ignore this corner of the financial world, but it’s a great place to shop for high dividend yields. These elite businesses enjoy entrenched market positions and generate steady cash flow, as well as... Read more

Dividend Growth 50: Oh Deere Me, This Portfolio's Income Just Keeps Plowing Ahead

Quarter after quarter, year after year, the announcement would come, the dividend would stay frozen at 60 stinkin' cents, and income-focused Deere (DE) investors would grumble. Yes, for four years, nothing ran (in place) like a Deere (dividend). Then came May 30, 2018, when the company announced it was raising its quarterly payout to 69 cents per share, its first hike since the second quarter of 2014. And then came Dec. 5, when the farm equipment maker said the dividend would be... Read more