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 6.57
Health Care Reit 6.40
Medical Properties Trust 5.30

Articles featuring Omega Healthcare Investors (OHI):

Dividend Cuts And Overdue Rent: REIT Earnings Recap

Did the rent get paid? Rent collection and dividend cuts were the primary themes of the most newsworthy and consequential REIT earnings season since the Great Financial Crisis.Rent collection was largely a non-issue for residential REITs, who collected over 95% of April rents. Industrial, office, self-storage, and healthcare rent collection metrics were similarly strong.Economic shutdowns ravaged the economically-sensitive property sectors and punished highly-levered REITs. 50 equity... Read more

Dividend Champion And Contender Highlights: Week Of April 26

A weekly summary of dividend activity for Dividend Champions and Contenders.Companies which declared increased dividends.Companies with upcoming ex-dividend dates.Companies with upcoming pay dates.Introduction The Dividend Champions list is a monthly compilation of companies which have consistently increased their annual dividend payouts, and the latest edition may be found here. However, since this list is only produced once per month, the data in it can quickly get out of... Read more

Growing Dividend Income And A Defensive Business In These Pandemic Times

McDonald's has increased its dividend for 43 years a dividend aristocrat and presently has a yield of 2.7%, which is above average.McDonald's cash flow is good and will allow the dividend to be increased, and share buybacks with cash left over for opening 1400 new stores in 2020.McDonald's total return over-performed the DOW average for my 52 month test period by 43.82%, which is great for this fast-food business.McDonald's three-year forward CAGR of 7% is good and... Read more

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 $0.67 per share. The common stock dividend is payable Friday, May 15, 2020 to common stockholders of record as of the close of business on Thursday, April 30, 2020.... Read more

Realty Income Corp.: A REIT For Monthly Income, Dividend Aristocrat And Diversified Portfolio

Realty Income Corp. has increased its dividend for 26 years in a row (a dividend aristocrat) and presently has a yield of 6.2%, which is well above average.Realty Income Corp. is diversified in the commercial real estate sector, both in location and type of property.Realty Income’s total return overperformed the DOW average for my 51 month test period by 0.97%, which is good for a commercial realty business that is well diversified in this.Realty Income Corp. (O) is a buy for the... Read more