Smart dividend plays

The second half of 2016 was not kind to income investors. As bond yields rose, the prices of virtually everything paying an income stream got slammed.

Some of my favorite dividend stocks, REITs and closed-end funds fell by 20% as stocks rallied.

In my opinion, if you’re investing for retirement, short-term price moves really don’t matter all that much. Earning a regular stream of income is far more critical.

So with that in mind, here are three dividend plays worth a look in 2017.


Realty Income (O)

The conservative retail REIT Realty Income Corp. has paid its dividend like clockwork for 556 consecutive months and counting.

Importantly, it’s raised that dividend for 76 consecutive quarters and has shown no indication of slowing down. Since 1994, the company has raised its dividend at a 4.6% annual clip.

Realty Income is not a bond. It’s obviously a stock. But in terms of stability and safety, it’s about as close to a bond as you can realistically get in the stock market in my view. The REIT owns a portfolio of high-traffic retail properties that are mostly recession-proof, and importantly, I believe internet-proof.

At current prices, Realty Income yields about 4.4%, which is nearly 2% higher than the yield on the 10-year Treasury. But unlike that Treasury coupon, which will never rise, Realty Income’s dividend will likely continue to rise every year.

LTC Properties Inc (LTC)

In my opinion, another REIT worth a serious look is health and senior living specialist LTC Properties Inc.

The REIT’s portfolio allocates 49.5% of its weighting to skilled nursing properties with another 45.5% in assisted living facilities. All in all, LTC has over 200 properties spanning 30 states.

Health and senior living might seem like boring niche markets, but LTC is actually a growth dynamo due to the aging of the baby boomers. More than 10,000 boomers turn 65 every single day, and as this generation ages, they will continue to need more and more healthcare.

STAG Industrial (STAG)

STAG Industrial Inc. is a young REIT, having gone public only in 2011, and like LTC, it operates in something of a niche market.

This REIT focuses on standalone, single-tenant properties in the light industrial space. A warehouse or manufacturing facility would be a typical property for STAG.

STAG has grown like a weed since its 2011 IPO, expanding its portfolio 344% to 300 properties in 37 states. And the beauty of its gritty industrial portfolio is that it doesn’t require a lot in terms of maintenance and expenses.

At current prices, STAG yields just shy of 6%, making it a high-yielder these days. And over the past three years, STAG has grown that dividend at a 9% annual clip. That’s exceptionally high for a boring portfolio of gritty industrial properties in my opinion.

My recommendation is to buy STAG, instruct your broker to reinvest the dividends, and then just let it ride. Five years from now, you’ll likely have a much larger share count–and a much fatter monthly dividend.

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