Time to Cherry Pick the Best Dividend Growth Investments

Three weeks ago, I asked if the bull market in REITs and MLPs was over, to which I replied “no.”

Bond yields may indeed be rising with the scaling back of the Fed’s quantitative easing, but few investors in or near retirement can eke out a living on today’s yields.  Even if the current payout made ends meet, there is no margin of safety for inflation at today’s levels.

A well-bought REIT and MLP portfolio offers something that bonds cannot: the potential for an income stream that rises over time.  REITs and MLPs also have built-in inflation protection in that their real assets and the rents that they generate should more than keep pace with general price inflation.

So long as there are Baby Boomers entering retirement, there should be a decent market for REITs and MLPs trading at a decent price.  And after today’s Fed-induced bloodletting, some of my favorites are now on sale.

Three weeks ago, I recommended buying shares of Realty Income ($O) and Martin Midstream ($MMLP) on any continued weakness.  I would say that yesterday’s rout qualifies as “weakness.”

And to this list I would add National Retail Properties ($NNN)—which fell a ridiculous 7.1% yesterday–and Retail Opportunities Investment Trust ($ROIC)—which is down by a comparable amount over the past two days.

Could more volatility be coming to this sector?

Absolutely.  I don’t necessarily expect it, but I certainly can’t rule it out.  This is why I recommend easing your way into these positions in stages.  Use yesterday’s bloodletting as a buying opportunity, but also keep a little powder dry in the event of another selloff.

Disclosures: Sizemore Capital is long O, NNN, ROIC, and MMLP. This article first appeared on TraderPlanet.



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