On Demand

REITS & MLP: An Income Stream That Rises Over Time

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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

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About the Author

CharlesSizemore

Charles Lewis Sizemore, CFA, founder and editor of Macro Trend Investor (formerly The Sizemore Investment Letter), is dedicated to finding superior investments backed by powerful macro trends—before you hear about them on the nightly news or read about them in the newspaper or on the Internet. He has been a frequent guest on Bloomberg TV and Fox Business News, has been quoted in Barron’s Magazine, The Wall Street Journal,and The Washington Post and is a frequent contributor to Forbes Moneybuilder, GuruFocus, MarketWatch and InvestorPlace.com.

Charles is the co-author of Boom or Bust: Understanding and Profiting from a Changing Consumer Economy (iUniverse, 2008); and worked alongside best-selling financial author and economic strategist Harry S. Dent, Jr. in creating original research on the effects of changing global demographics on asset returns and economic growth. He also serves as the Chief Investment Officer of Sizemore Capital Management LLC,  a registered investment advisor.

His academic and real-life experience has given him a unique approach to investing: combining his insights into global macro trends with in-depth investor research. And he has developed a reputation for taking complex issues, recognizing long-term investment strategies, and then finding the hidden investing opportunities that he shares with investors.

Charles holds a master’s degree in Finance and Accounting from the London School of Economics in the United Kingdom and a Bachelor of Business Administration in Finance with an International Emphasis from Texas Christian University in Fort Worth, Texas, where he graduated Magna Cum Laude and as a Phi Beta Kappa scholar.

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