Magic 8 ball of predictions in female hand with red nails isolated on white background
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I recently came across an advertisement that boasted how you could retire on stocks that feature 8% dividend yields.
What you’ll read below isn’t an exact quote, since my goal with this article isn’t to step on anyone’s toes. (It’s to talk about eight intriguing real estate investment trusts, or REITs, with significantly sized yields.) But I do want to highlight it in order to make a few distinctions.
So, for that reason, it went something like this:
The brains behind big banks claim you’ll need more than $700,000 if you want to have a comfortable retirement.
But in that, they’re short-sighted… They’re not thinking straight… Not seeing the big picture.
Because – believe it or not – you don’t need nearly that much. Take that price and cut it by over $200,000. Your actual figure is much closer to $500,000 in order to properly enjoy your golden years.
If you’ve got more, then great! Good for you. In that case, expect to retire as a flat-out wealthy man or woman…
Just as long as you follow my “All the Way” plan, which will show you how to live – even thrive! – on nothing more than dividends… and without selling off a single stock in the process.
There’s no other way to properly and profitably safeguard your retirement like you need to against the next downturn… the next recession… or the next depression. Plus, ironically, it puts you in a perfect place to benefit from a price upside of 10%.
Above and beyond your monthly dividends!
Sounds impressive, right? Maybe even a little bit tempting?
Let’s discuss its claims right below.
Some Caution Required
Now, according to my amazing editor (thank you for putting in the long hours), the copy in question features far too many suspense-building ellipses. This, she says, makes it much more cheesy and visually distracting than she’d prefer.
She also informed me that it misuses “ironically,” claiming that it’s one of the most misconstrued words in the English language. Apparently, she feels very strongly about this.
But those two presentational issues aside, let’s talk about the actual claims the advertisement makes.
To do so, I have to admit that I didn’t subscribe to the newsletter being touted. So I can neither confirm nor deny whether its portfolio is filled with truly profitable picks or whether it’s dealing in riskier companies prepping to ply you with so-called sucker yields.
After all, as I explained in my recent article detailing seven stocks yielding 7% yields, you need to be careful. Higher yields could mean that a company is trying to hide disconcerting fundamentals. Or that it’s “living in the moment” like a teenager who just won the lottery.
Which, for the record, isn’t good.
And while 7% yields and 8% yields aren’t as high as REITs can go, they do perhaps require a bit more scrutiny than, say, 4% or 5% yields.
So there’s that concern I want to bring up. For starters.
There are a few other issues I have about what we just read, as described below.
This Is How WE Do 8% Dividend Yields
The impression I got from the ad is that it’s telling you to put all your money into dividend stocks. Every single bit of it.
I could be wrong in that interpretation, and – truth be told – I hope I am. Because as much as I love recommending REITs, diversification is a must. That diversification may and probably should change as time goes on and your ideal investment tolerance shifts.
But you should never just invest in one segment or sector of the market. Never.
Then there’s this bit… the claim that the touted portfolio “puts you in a perfect place to benefit from a price upside of 10%. Above and beyond your monthly dividends!” It sounds a bit sketchy since the majority of dividend stocks and growth stocks don’t fall into the same category.
That’s not to say that they absolutely cannot. The two categories certainly may mesh under the right conditions – and, in fact, there’s more than one of them in my Forbes Real Estate Investor portfolios right now – their share price definitely isn’t going to rise so rapidly during “the next downturn… the next recession… or the next depression.”
Dividend stocks and REITs in particular are designed to follow the “slow but steady wins the race” motto. You can win big off of them, as I argued in “How Rentals (Like REITs) Can Make You a Billionaire in June,” a claim I firmly stand by. I’m just not sure if I’m buying into this particular advertisement’s particular claim to making that money.
But again, the purpose of this article isn’t to poke holes in someone else’s marketing material. It’s to provide you with your own set of 8% yields to put toward your retirement, so here you go…
Kite Realty (KRG)
Sector: Shopping Center
Dividend Yield: 8.12%
Price to Funds from Operations: 8.7x
Variance to price target: -31%
Ladder Capital (LADR)
Sector: Commercial Mortgage
Dividend Yield: 8.10%
Price to Funds from Operations: na
Variance to price target: -3.5%
TPG Real Estate (TRTX)
Sector: Commercial Mortgage
Dividend Yield: 8.73%
Price to Funds from Operations: na
Variance to price target: +2.3%
KKR Real Estate (KREF)
Sector: Commercial Mortgage
Dividend Yield: 8.57%
Price to Funds from Operations: na
Variance to price target: +4.2%
Starwood Property Trust (STWD)
Sector: Commercial Mortgage
Dividend Yield: 8.34%
Price to Funds from Operations: na
Variance to price target: +0%
Tanger Outlets (SKT)
Sector: Mall
Dividend Yield: 8.56%
Price to Funds from Operations: 7.1x
Variance to price target: -44%
Iron Mountain (IRM)
Sector: Storage/Diversified
Dividend Yield: 8.17%
Price to Funds from Operations: 13.1x
Variance to price target: -25%
Landmark Infrastructure (LMRK)
Sector: Infrastructure (an MLP)
Dividend Yield: 8.54%
Price to Funds from Operations: na
Variance to price target: +7.5%
Note that LMRK is a small cap stock and we rate as a speculative buy.
I own shares in LADR, TRTX, KREF, SKT, IRM, and LMRK.