Today were going to dive into a corner of the market where 6%+ dividends are everywhere. Whats more, the funds behind these payouts have crushed the S&P 500 for decadeseven during the financial crisis.
Ill also introduce you to a specific fund thats throwing off a 6.7% payout every month, and should be on any income investors radar. More on that shortly.
First, Im talking about real estateand in particular a group of closed-end funds (CEFs) that hold high-yielding real estate investment trusts (REITs), companies that own properties ranging from seniors homes to cell towers.
Yes, real estatethe sector at the heart of the subprime-mortgage crisis. That period made a lot of people panic-sell real estate and swear it off for goodwhich is too bad, because these folks went on to miss out on big gains in the rebound.
REITs Have Beaten the Market in the Long Run
If we compare the SPDR S&P 500 ETF (SPY) to the SPDR Dow Jones REIT ETF (RWR), a good proxy for REITs, we see that REITs have risen in price far higher than stocks as a whole over the long term, even with the financial crisis.
Real Estate Is the Clear Winner
The price chart above is how most people look at stocks. But its also misleading, especially when it comes to REITs.
Thats because RWR pays a 3.3% dividend yield, nearly double the payout of the S&P 500. Since price charts dont include dividends, the chart above is massively underestimating RWRs profits. If we look at the total price return, which adds those payouts back in, we see that RWR didnt beat SPY by a littleit beat it by a lot.
RWR Crushes Stocks
Since its inception in 2001, SPY has given investors less than half the 508% total return RWR has delivered, making RWR one of the best-performing ETFs of all time. But because most brokers dont provide total-price-return data (and it isnt on Yahoo Finance or Google Finance, either), most folks dont know how badly REITs have beaten the broader market.
And keep in mind that the time period were looking at is unusual, since it includes the greatest financial crisis in living memory.
Beating the Market, Even With the Crash
REITs arent extraordinary for doubling the markets returns. What really sets them apart is that they outperformed stocks even during the housing crisis!
A Faster Recovery Than Stocks
During the Great Recession of 2007-09, which was caused by housing prices falling by over 60% in some US markets, REITs still recovered faster than stocks, and by the end of 2011 were beating equities by a small margin.
This was even after panic selling in 2009 caused REITs to bottom out much lower than stockswhich, for a patient REIT investor, was a gift because it allowed them to pocket 80% returns in just two years by buying when the market was selling.
This is a truly amazing fact: when real estate was suffering the biggest financial disaster in nearly a century, it still beat stocks.
A 1-Click Way to Amplify Your REIT Income
This outperformance really boils down to income.
Real estate always provides an income stream, and it can always be valued relative to that income stream. Sure, markets can go crazy, as they did in the 2000s, but with that anchor in income, real estate will always provide cash flow that can help you weather a financial storm. Thats been a major contributor to REITs success, which is why their total returns are so much bigger than their price returns.
So if you really want to crush the market by investing in REITs, it makes sense to maximize your income. And you can do that by choosing a CEF that focuses on REITs and pays out double RWRs dividend.
Which brings me to the CEF I mentioned off the top: the Cohen & Steers Quality Income Fund (RQI), which yields 6.6% now. RQI is about more than a big dividend. Take a look at this chart:
RQI Leaves the Rest in the Dust
Not only has RQI (in red above) crushed the benchmark SPDR S&P 500 ETF (SPY)in bluesince its IPO, its even beaten RWR (in orange) on a total-return basis. Thats thanks in part to changes in the fund in the last decade, which have helped RQIs portfolio explode in value.
RQI Learned From the Crisis
RQI isnt the only REIT-focused CEF. With a total of 10 REIT CEFs paying dividends anywhere from 6% to 8.7%, there are lots of options for you to beat the market while getting a bigger income stream.
Which brings me to
The Perfect REIT CEF for 2020: A 7.8% Dividend at an 8% Discount
My favorite REIT-focused CEF for 2020 gives us 3 critical benefits:
That makes this fund the antidote if you feel youve missed out on the REIT rally this year, because, unlike many REIT stocks and funds, this fund is still cheap today! But that wont last as falling interest rates send more investors rushing in to tap this massive 7.8% dividend (paid monthly, no less).
The name of this fund is waiting for you now: just click right here and Ill set you up with a no-risk 60-day trial to my CEF Insider service. Youll find this income wonder in the services 18-fund portfolio, which yields 7% on average and boasts CEFs yielding as high as 10.2%.
Thats not all: youll also get a FREE Special Report outlining my 4 very best CEF picks for your portfolio now. Each of these 4 dynamic funds yields 5 TIMES more than your typical S&P 500 stock and is poised for 20%+ price gains in 2020, thanks to their incredible discounts to NAV.