The Best Long Term Dividend Stocks To Buy

| June 29, 2015 | 0 Comments

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Want to find the best long term dividend stocks to buy?

Invest like Howard Hughes.  I’ll show you how to channel your inner eccentric tycoon in a minute, but first…

Keep in mind that the best long-term dividend stocks come in different flavors.

You have some good choices, like checking out the S&P 500 Dividend Aristocrats or finding a small cap dividend stock where there’s a history of consistent dividend growth.

But there’s a door number 3 you should crack open.  Take a look at the best Real Estate Investment Trusts (REITs).

You’ll be looking at some of the best long-term dividend stocks and you can get a good deal on a high yield.

In the world of dividend stocks, REITs are like their own country.

REITs are kind of like a “Stock Market Switzerland,” because they’re much, much different from common stocks.

(Or even preferred stocks that pay dividends.)

If a REIT doesn’t pay big dividends, it’s literally shooting itself in the foot.  That’s because the U.S. Tax Code Act gives the REIT a huge tax break if it plows 90% or more of its income into dividends.

Not a bad deal, is it?

So how do you find a good REIT?  How do you zero in on a REIT that will be one of the best long term dividend stocks, and what should you keep in mind as you size them up?

Check Out The Neighborhoods Where The Best Long Term Dividend Stocks Live

A REIT is a trust.  It puts the money you invest into a pool and uses the money to buy real estate.

Most REITs specialize in a specific kind of property.

You can invest in a REIT that owns office buildings, warehouses, luxury hotels, or shopping centers.

Some REITs have a geographical focus and own property in a specific city or region.

Others focus on an industry, such as health care, and invest in office space that’s leased to doctors, outpatient facilities, or medical labs.

There’s a REIT for just about every kind of real estate.

And they can be some of the best dividend stocks out there.

In 2014, REITs came through with an average dividend yield of 3.56% compared to a 2.00% yield for the S&P 500.

Why REITs Can Be The Highest Yielding Stocks

Yield is income.  And REITs are all about income.

They’ve locked in deals to collect rent month after month, year after year.

When a REIT like Federal Realty Investment Trust $FRT, which owns shopping centers and leases space to a retailer, it’s sitting on a stream of future income.

But it’s not all rosy.  When retailers get in trouble, as we’ve seen with companies like Radio Shack, leases can be cancelled.  Space can sit empty until a new tenant comes in.  The income takes a hit.

In fairness to Federal Realty Investment Trust, it’s not all retail all the time… it also has a stake in apartment buildings.

But you don’t have to be a landlord when you invest in a REIT.  You can channel your inner Howard Hughes (without hideous fingernails or mysterious journeys to the Bahamas).

When you invest in The Howard Hughes Corporation $HHC REIT, you’re not rolling the dice on Vegas casinos.

You’re investing in master planned communities like The Woodlands outside Houston and Columbia Maryland between Baltimore and Washington, DC.

(But you still get some action in Vegas, although it’s off the strip, miles away from Hughes’ former digs at the Desert Inn.   The Howard Hughes Corporation is the developer of the Summerlin community in Las Vegas.)

This REIT has been rocking… up 400% over the past five years.

Take a look at the chart and between the lines, you can see the ghost of Howard Hughes, grinning from ear to ear…

Best Long Term Dividend Stocks REIT $HHC 5 Year Chart

Want To Brace Yourself Against Inflation?

When you look at the top dividend stocks with an eye on fighting inflation, REITs look pretty good.

That’s because the leases the property managers negotiate with tenants tend to raise the rent every year.

Tenants expect it as a cost of doing business.  When there’s a 10-year lease with an annual percentage increase, you’re protected against the sting of inflation.

Naturally, the exact degree of protection you get depends on the leases.

Looking For REITs With An Even Higher Yield?

There’s a special kind of REIT that is a high yield flamethrower.

It invests only in mortgages.  It’s called an MREIT and it can be a gem when you’re looking for the best stocks for dividends.

In 2014, the average yield for one of these MREITs was 10.66%.

There are 33 MREITs and they buy mortgages backed by Freddie Mac and Fannie Mae.

How do these REITs make money?

They borrow money with short-term debt then turn around and buy the longer-term mortgages.  The difference between the two rates, or the spread, is the profit.

This means you want to keep an eye on interest rates if you invest in an MREIT.

If the cost of short-term borrowing goes up, the spread goes down.

It could also slash the value of some of the mortgages the MREIT owns.

The REIT That’s Right For Your Dividend Stock Portfolio

The key is diversification.

Don’t make a big bet on one kind of real estate.  Mix up office buildings, shopping centers, and hotels.

Mix up geography.  If you’re going to invest in a REIT that focuses on one region, such as New York City or Southern California, also keep regional economies in mind as a piece of your diversification strategy.

Don’t go too deep in one part of the country.  When real estate is hot in Houston, in can be cold in Columbus.  That’s what nice about the Howard Hughes Corp.

I’m suspicious of high yield, and you should be too.  Be careful.

Even though the world of REITs is a higher yield world than you’ll find with regular stocks, don’t get lured into high yield stocks that can go south on you.


Paul Duke

Note:  Paul Duke writes and edits  Sign up for our free dividend reports and dividend newsletter at  We’ll show you how to create regular income by investing in dividend stocks, easily, step-by-step.

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Category: Dividend Stocks To Buy?

About the Author ()

Paul “Dividend” Duke is a veteran investor with a longstanding interest in dividend stocks. He brings a balance of both technical and fundamental analysis to his work, and focuses on opportunities that provide safety, capital appreciation, and income.

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