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REITS? Senior debt?
Old 05-07-2012, 08:32 AM   #1
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REITS? Senior debt?

What are your thoughts on these as a small portion of a portfolio?

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Old 05-07-2012, 08:41 AM   #2
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I have some AGNC and NLY. I'd be leery about putting too much of my portfolio in an REIT, but a small amount might be okay. In my case, I'd say they're about 7% of my total portfolio. Of that, about 2/3 is after tax, in my Scott trade account, and 1/3 is in a rollover IRA.

One thing to consider, is that the dividends are taxed at your income rate, rather than the dividend rate. So, if you're in a high tax bracket, taxes will be a bit hefty.

I've been happy with them so far. Both have cut their dividend rates a bit this year, though.

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Old 05-07-2012, 08:48 AM   #3
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I'm perfectly fine with REITs as about 5-10% of an investment portfolio. Last I checked they were about 7% of mine.

As Andre mentioned above, these are best held in IRAs and other retirement accounts because REIT dividends are taxed as ordinary income (this is because they don't suffer the "double taxation" problem of most other dividends).
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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Old 05-07-2012, 09:56 AM   #4
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I use 5% VNQ and 5% RWX for domestic and international RE exposure. Certainly VNQ has been quite a ride and a nice rebalancing opportunity.
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Old 05-07-2012, 11:40 AM   #5
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If you're curious, here's a rough estimate of how I've fared with my two REITs.

I first bought AGNC on 9/16/10, and it was $29.10 per share back then. I've had seven quarters of dividends, for a total of $9.65/share. Last time I checked, it was going for $31.57 per share. So, add the dividends back, and that's a total value of $41.22, or a 41.6% return, in about 1 3/4 years (7 quarters)

With NLY, I haven't done as well. Bought my first batch on 10/28/10, for $17.38 per share. Had six quarters of dividends so far, totaling $3.63/share, but it's now going for around $16.31/share. So here I've only seen a 14.7% return, in a year and a half (6 quarters).

NLY took a pretty big hit last year, when they announced a dividend cut, dropping it from something like 65 cents per share to 60. Since then they've dropped it to 57 and then 55, but those announcements didn't do nearly as much damage.

AGNC had paid a consistent $1.40 per quarter, but the most recent they cut it to $1.25. However, that didn't seem to hurt the share price.
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Old 05-07-2012, 11:50 AM   #6
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I have owned VGSIX (the REIT index fund) and the TRREX REIT mutual fund since 2007. It has been a wild ride but the last few years have been very good.
I am at 17% now. I will bring it down below 15% by the end of this year and keep it between the 10-15%.
I think REITs are too volatile for a retiree to own much of.
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Old 05-07-2012, 05:30 PM   #7
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I have been a big fan of (property, not mortgage) REITs in the past, especially in the 1999-2003 period when they were valued well below regular stocks. Now they are valued higher than regular stocks (by my calculations), so I have not owned any in years.

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