10 “Unusual” REITs to Buy for Yields of Up To 7.7%
When real estate investment trusts (REITs) are mentioned, most investors think of office space, apartment buildings and shopping malls. However, the REIT universe includes a much wider variety of properties. Today investors can purchase REITs that own cell towers, data centers, billboards, timber and even farmland.
Like traditional REITs, these niche players offer reliable dividends, but with the added bonus of better income opportunities and even unusual growth potential.
They also boast less risk exposure to interest-rate swings. Traditional REITs sometimes lose value when interest rates spike because the present value of future dividends declines. The performances of most niche REITs, however, are more aligned with the customers they serve. An example is datacenter REITs, which have risen in value due to the expanding data storage demands of their tech customers.
Niche REITs also may improve a portfolio's diversification thanks to their low correlations with other stocks. Timberland has less than a 14% correlation with the S&P stocks, and farmland is a low-risk investment that performs well during stock market meltdowns or spiraling inflation. Diversification is in part why Harvard's and Yale's endowment funds own timberland and farmland assets.
The best reason to own specialized REITs, however, may be to gain low-risk exposure to high-growth industries. Data center REITs are tech-focused real estate plays on big data, cloud computing, streaming content and social media. With the world's data volume forecast to double every two years, these tech sectors are booming. Similarly, cell tower REITs provide infrastructure that supports exponential growth in mobile data and smartphones.
Investors who own these 10 "unusual" REITs may collect traditionally high yields
