Get Rich By Owning REITs With Growing Dividends
- It’s proven dividend growth (or lack of dividend growth) and price appreciation are correlated.
- The best opportunities can be found with the companies that have the highest dividend growth prospects with the widest margin of safety.
- There’s simply no need to be a market timer and try to get rich buying shares in beaten-down REITs like CBL and WPG.
- Stocks with dividend increases are indicative of underlying business success and the company.
I just rolled out the new Mega-Millions Portfolio (referenced in a recent article), and today, I thought it would be valuable to provide readers with a list of my Top 5 “Mega-Millions” REITs to buy.
Keep in mind, the logic behind the new Mega-Million REIT Portfolio is such that the average investor can gain access to a diversified portfolio of REITs that encompasses a variety of property sectors and subsectors.
In this newest portfolio, I intentionally decided to overweight the technology sector that includes data centers, infrastructure (fiber and cell towers) and industrial (logistics). In addition, the primary prerequisite for being included in the Mega-Million portfolio is dividend growth.
It’s proven dividend growth (or lack of dividend growth) and price appreciation are correlated. A few days I wrote an article on Washington Prime (WPG), and I commented that the market had likely not factored in a potential dividend cut for the high-yielding REIT.
Some argued that I was wrong, suggesting that if WPG opted to cut the dividend, that the price would not go down.
Source: Yahoo Finance
WPG shares are down by ~7.0%, likely due to bearish retail news, so I would not assume that a Sears (NASDAQ:SHLD) BK is “already priced in”. When there’s a possibility of a dividend cut (albeit WPG has adequate cushion now), I would never advise anyone to jump on the train.
Alternatively, most of my picks are centered on REITs with growing dividends, and the best opportunities can be found with the companies that have the highest dividend growth prospects with the widest margin of safety.
There’s simply no need to be a market timer and try to get rich buying shares in beaten-down REITs like CBL and WPG. Stocks with dividend increases are indicative of underlying business success, and the company would not raise its dividend if the business was not experiencing growth in revenues, profit, and FFO (funds from operations). The data proves that this is indeed the case:
As you can see, over the long run (1972-2015), dividend growers have outperformed the three other categories (no-growth dividend payers, non-dividend-paying stocks, and dividend cutters) while demonstrating less volatility. This combination of higher return and lower volatility would lead to a much better risk-adjusted return (as measured by the Sharpe ratio) Source: investorplace.com.
Whether WPG shares are priced in for a cut or not is irrelevant to me; my job is simply to communicate the danger, which I have. Also, I’m not providing you with a breaking news story on the power of dividend growth investing; someone much smarter than me thought of that long ago:
“The prime purpose of a business corporation is to pay dividends regularly and, presumably, to increase the rate as time goes on.”Benjamin Graham in Security Analysis