The Best Long Term Dividend Stocks to Buy

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• Hi, My name is Aaron and Im with Dividend Stocks
  Research, today were reviewing our recently
  published article

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The Best Long Term Dividend Stocks to Buy
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Want to find the best long term dividend stocks
to buy? Invest like Howard Hughes. Ill show
you how to channel your inner eccentric tycoon in
a minute, but first
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Keep in mind that the best long-term dividend
stocks come in different flavors. You have some
good choices, like checking out the SP 500
Dividend Aristocrats, or finding a small cap
dividend stock where theres a history of
consistent dividend growth.
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But theres a door number 3 you should crack
open. Take a look atthe best Real Estate
Investment Trusts (REITs.) Youll be looking at
some of the best long-term dividend stocks and
you can get a good deal on a high yield.
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In the world of dividend stocks, REITs are like
their own country. REITs are kind of like a
Stock Market Switzerland, because theyre much,
much different from common stocks.
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(Or even preferred stocks that pay dividends.) If
a REIT doesntpay big dividends, its literally
shooting itself in the foot. Thats because the
U.S. Tax Code Act gives the REIT a huge tax break
if it plows 90 or more of its income into
dividends.
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Not a bad deal, is it? So how do you find a good
REIT? How do you zero in on a REIT that will be
one of the best long term dividend stocks, and
what should you keep in mind as you size them up?
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Check Out The Neighborhoods Where The Best Long
Term Dividend Stocks Live
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A REIT is a trust. It puts the money you invest
into a pool and uses the money to buy real
estate. Most REITs specialize in a specific kind
of property.
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You can invest in a REIT that owns office
buildings, warehouses, luxury hotels, or shopping
centers. Some REITs have a geographical focus and
own property in a specific city or region.
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Others focus on an industry, such as health care,
and invest in office space thats leased to
doctors, outpatient facilities, or medical
labs. Theres a REIT for just about every kind of
real estate.
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And they can be some of the best dividend stocks
out there. In 2014, REITs came through with an
average dividend yield of 3.56 compared to a
2.00 yield for the SP 500.
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Why REITs Can Be The Highest Yielding Stocks
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Yield is income. And REITs are all about
income. Theyve locked in deals to collect rent
month after month, year after year.
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When a REIT like Federal Realty Investment Trust
FRT, which owns shopping centers, leases space
to a retailer, its sitting on a stream of future
income.
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But its not all rosy. When retailers get in
trouble, as weve seen with companies like Radio
Shack, leases can be cancelled. Space can sit
empty until a new tenant comes in. The income
takes a hit.
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In fairness to Federal Realty Investment Trust,
its not all retail, all the time... it also has
a stake in apartment buildings. But you dont
have to be a landlord when you invest in a REIT.
You can channel your inner Howard Hughes.
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(Without hideous fingernails or mysterious
journeys to the Bahamas.) When you invest in
The Howard Hughes Corporation HHC REIT, youre
not rolling the dice on Vegas casinos.
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Youre investing in master planned communities
like The Woodlands outside Houston and Columbia
Maryland between Baltimore and Washington, DC.
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(But you still get some action in Vegas, although
its off the strip, miles away from Hughes
former digs at the Desert Inn. The Howard
Hughes Corporation is the developer of the
Summerlin community in Las Vegas.)
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This REIT has been rocking... up 400 over the
past 5 years. Take a look at the chart and
between the lines, you can see the ghost of
Howard Hughes, grinning from ear to ear...
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Want To Brace Yourself Against Inflation?
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When you look at the top dividend stocks with an
eye on fighting inflation, REITs look pretty
good. Thats because the leases the property
managers negotiate with tenants tend to raise the
rent every year.
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Tenants expect it as a cost of doing business.
When theres a 10-year lease with an annual
percentage increase, youre protected against the
sting of inflation. Naturally, the exact degree
of protection you get depends on the leases.
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Looking For REITs With An Even Higher Yield?
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Theres a special kind of REIT that is a high
yield flamethrower. It invests only in
mortgages. Its called an MREIT and it can be a
gem when youre looking for the best stocks for
dividends.
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In 2014, the average yield for one of these
MREITs was 10.66. There are 33 MREITs and they
buy mortgages backed by Freddie Mac and Fannie
Mae. How do these REITs make money?
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They borrow money with short-term debt then turn
around and buy the longer-term mortgages. The
difference between the two rates, or the spread,
is the profit. This means you want to keep an eye
on interest rates if you invest in an MREIT.
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If the cost of short-term borrowing goes up, the
spread goes down. It could also slash the value
of some of the mortgages the MREIT owns.
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The REIT Thats Right for Your Dividend Stock
Portfolio
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The key is diversification. Dont make a big bet
on one kind of real estate. Mix up office
buildings, shopping centers, and hotels.
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Mix up geography. If youre going to invest in a
REIT that focuses on one region, such as New York
City or Southern California, also keep regional
economies in mind as a piece of your
diversification strategy.
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Dont go too deep in one part of the country.
When real estate is hot in Houston, in can be
cold in Columbus. Thats what nice about the
Howard Hughes Corp.
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Im suspicious of high yield, and you should be
too. Be careful. Even though the world of REITs
is a higher yield world than youll find with
regular stocks, dont get lured into high yield
stocks that can go south on you.
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