It's not easy being an income investor these days.

Short-term rates, already in decline, are widely expected to drop further — especially once President Donald Trump appoints a new chair of the Federal Reserve.

Investment-grade corporate bond spreads are historically low. That means you get very little extra for moving your money out of (presumably risk-free) U.S. Treasuries and into bonds issued by companies.

The situation gets even more bleak when turning to stocks. The dividend yield of the S&P 500 index is a paltry 1.1%. That's also near historic lows.

Thankfully, there are still pockets of the income investment universe that are much more generous. One that we at Stansberry Asset Management (SAM) find particularly attractive is a niche and often overlooked part of the real estate market: self-storage.

The future for storage demand looks bright

If you've never used a self-storage facility before, you might be surprised how many Americans do: nearly 40% by some counts. Demographic trends point to this number remaining stable or even growing.

As a wave of Baby Boomers are reaching retirement age, many are opting to downsize to smaller homes, condominiums or retirement communities. This downsizing process typically involves decluttering.

Yes, some possessions will end up in the trash or giveaway pile. But folks are often reluctant to let go of sentimental or potentially useful items. These items often end up in storage.

According to the U.S. Census Bureau, Millennials (those born from 1981 to 1996) are now the largest generation group in the United States. It has commonly been observed that compared to their predecessors, Millennials prioritize experiences over material possessions as well as lifestyle flexibility.

On the surface, that seems like it would be a headwind for self-storage demand. But these preferences draw Millennials to urban areas, which, in addition to job opportunities, offer vibrant social scenes and lifestyle amenities. All great things. But city living often equates to smaller apartments or shared spaces. That means limited storage.

The rise of the "gig economy" is yet another driver of self-storage demand as freelancing roles may require space for storing equipment and inventory.

That's in addition to the many businesses that commonly use storage including both online and brick-and-mortar retailers (inventory), real estate agents (staging pieces) and construction companies (tools, equipment and materials) to name just a few.

How to invest in self-storage REITs

As a business, there is a lot to like about self-storage. These companies typically generate stable cash flows, have low maintenance costs and have proven surprisingly resilient in previous economic downturns.

Then there's the yields. Publicly traded self-storage companies are structured as real estate investment trusts (REITs). REITs are required by law to distribute at least 90% of their taxable income as dividends to shareholders. At current valuations, annual dividend yields for public storage REITs range from 4.4% to 7.7%.

Source: FactSet as of 1/6/2026. Estimated 2026 AFFO.

In the world of income investing, simply buying the highest yielding securities is not advised. Buying self-storage REITs that way is no exception. Typically, the higher the yield you receive, the more risk you are taking.

The key is to be aware of and methodical about the risk you take. With that in mind, consider a few of the other metrics on the table above and what they tell us.

Valuation. No matter what you are buying, it's always a good idea to not overpay. Stock investors often use the price/earnings ratio (P/E) as a way to value stocks. It tells you what price you are paying for $1 worth of annual earnings.

However, that earnings number can quickly become misleading in the world of REITs due to factors such as non-cash expenses (for example, depreciation) and gains from property sales.

That's why SAM prefers looking at the price-to-adjusted funds from operations (AFFO). The average P/AFFO is about 15x for the group, though there are outliers in both directions.

Profitability. Take a look at the earnings before interest, taxes, depreciation and amortization (EBITDA) margin table. That tells you the company's operating profitability (in this case we're looking at data from the most recent quarter, or mrq).

Now compare this to the market capitalization, which tells you the total market value of the company's outstanding shares, or put more simply, how big the company is.

The connection: The bigger the company, the more profitable it tends to be. That makes sense when you consider that bigger companies can operate leaner per facility, leverage technology, benefit from experience, knowledge and often from a lower cost of capital.

Leverage. Remember, REITs are required by law to pay out the vast majority of earnings to shareholders. That's how we land those juicy yields.

However, it doesn't leave much retained capital to reinvest in the business. To do that, REITs typically issue more shares and/or issue more debt.

Let's take a look at the debt side of things by comparing net debt (that is, the debt remaining after accounting for cash on the balance sheet) to the last 12 months of funds from operations (FFO). The higher the number, the more leveraged the company.

Now, leverage itself is not bad. Frankly, it can be a good thing, provided the company is making an adequate return on what it's borrowing.

But there can be too much of a good thing. Leverage amplifies risk, and a company can find itself struggling to pay back debt when business is bad.

Getting the best yield for the least risk

There is much more to consider when investing in self-storage REITs — geographic exposure, growth projections, occupancy rates and management teams to name a few. But the above metrics should get you started on your investment journey.

And keep in mind that nothing is static. Financials, outlooks, even management teams change over time. That's why SAM, as an active manager, is constantly reevaluating in our efforts to capture the best yield for the least risk on behalf of our income-focused clients.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Question: I hear REITs are one of the best ways to get income from investing, especially in retirement. Should I buy them or are they too much of a headache?

Answer: It's a done deal. The Federal Reserve lowered the targeted fed funds rate to 4.00% to 4.25% at its September meeting and indicated that it will likely chop off another half percent before year's end. The days of high interest rates are drawing to a close.

Money market rates are now trending lower, and the dividend yield on the S&P 500 is hovering near all-time lows. If you're an investor looking to generate income, that's not what you want to hear.

So, what's an income investor to do?

For a dependable income option, consider real estate investment trusts (REITs).

Real estate has been a preferred income vehicle for the wealthy for literally thousands of years. And in modern America, it continues to be a coveted store of value and one that comes with tax breaks and preferred financing that simply don't exist elsewhere.

Of course, investing in real estate comes with some drawbacks. Given the high cost of individual properties, it's not so easy to build a diversified portfolio. Property management can be time-consuming and expensive. And buying or selling a property tends to be a slow and cumbersome process.

That's where REITs become an interesting option. REITs are companies that own, operate or finance income-producing real estate such as apartments, office buildings, warehouses or even mortgages.

They allow you to buy or sell a diversified, dividend-paying real estate portfolio with the click of a mouse, just like any other stock. Think of it as a headache-free way to own real estate in your brokerage account or IRA.

Why real estate … and why REITs?

The benefits of real estate are obvious. Property is a natural inflation hedge, and rents tend to rise in line with inflation over time.

Banks are more than happy to lend for real estate with preferential long-term financing at low rates. The tax code also favors real estate, allowing landlords to write off non-cash "phantom" expenses like depreciation.

This makes real estate one of the most tax-efficient investments you're ever going to find. And every dollar not paid in taxes is a dollar available to distribute to the landlord.

It should come as no surprise that REITs tend to be some of the highest dividend-paying stocks in the market. The FTSE NAREIT All REITs Index boasts a dividend yield of 4.2% as of late September.

And popular REIT exchange-traded funds are high-yielders too. Indeed, the Vanguard Real Estate Index ETF (VNQ) currently yields 3.8%. Compare that to the 1.2% dividend yield currently on offer by the S&P 500.

What's more, REIT dividends are competitive with bond yields. At the time of this writing, the yield on the 10-year Treasury note is just 4.1%.

But this is what really tips the scales in REITs' favor. If you buy a 10-year bond today and hold it to maturity, you cannot earn more than 4.1% per year. It's fixed income, after all, meaning it doesn't move.

REITs, however, tend to raise their dividends over time. As a case in point, blue-chip REIT Reality Income (O) has raised its dividend for 112 consecutive quarters (and counting!) and has boosted its dividend at a 4.2% annual compound rate since going public in 1994.

That consistent dividend growth provides inflation protection you're simply not going to get in the bond market, and it can help you maintain or improve your standard of living in retirement.

Dividends are less secure than bond coupon payments, of course. When times get tough, companies often reduce or eliminate their dividends. That certainly happened during the 2028 real estate bust and, to a lesser extent, during the 2020 pandemic. This is why you should always diversify your risk across multiple payers.

Aren't the taxes a headache?

To start, don't worry about tax complexity. The dividends will show up on the 1099 tax form your broker gives you, and it's all plug and play. TurboTax or whatever tax software you use will do the math for you.

REIT taxation is a little quirky, but that quirkiness actually works to your advantage.

Consider this. Bond interest is taxed as ordinary income. Whatever tax bracket you're in, that's the rate you're going to pay on your bond or money market income. If you're a high earner, that could mean paying 37 cents of every dollar earned in interest.

That's not how REITs are taxed.

To start, unlike regular corporations, REITs pay no income tax at the corporate level so long as they distribute at least 90% of their profits as dividends. That's a major contributing factor to the high yields that REIT investors tend to enjoy. Every dollar not paid to Uncle Sam is a dollar available to pay as a dividend.

Beyond that, the dividends are generally taxed at a better rate. While it varies over time and from REIT to REIT, a portion of the payout is generally a tax-free return of capital or taxed as long-term capital gains (generally 20% or less).

According to NAREIT, 78% of REIT dividends in 2024 were considered ordinary income, with the rest classified as return of capital or long-term capital gains. But it's not uncommon to see that number in the 50s or 60s. Additionally, you can often deduct up to 20% of your REIT dividends as qualified business income.

There are a lot of moving parts here, so we can simplify. The tax rate on REIT dividends will generally be a little higher than the rate on qualified dividends from regular common stocks such as McDonald's (MCD) or Microsoft (MSFT). But they will also typically be significantly lower than the taxes you pay on bonds or other fixed-income products.

Again, if you're not a tax whiz, don't worry about it. Any off-the-shelf tax program will do the math for you.

Like all corners of the stock market, REITs are not without their risks. Real estate is subject to boom and bust cycles just like regular common stocks. But if you're looking for retirement income to keep pace with inflation, they deserve a place in your portfolio.

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Editor's note: This is part one of a two-part series about forced Section 721 UPREIT conversions when a Delaware statutory trust (DST) goes full-cycle and reaches the end of its hold period. Part two will discuss the flip side of these forced conversions, as well as preferred alternatives.

IMPORTANT MEMORANDUM

TO: All 1031 exchange, 721 exchange UPREIT and Delaware statutory trust investors
FROM: Dwight Kay, founder and CEO of Kay Properties & Investments
SUBJECT: Risks of forced DST-UPREIT conversions

EXECUTIVE SUMMARY

In recent Delaware statutory trust (DST) offerings, some sponsors include forced Section 721 UPREIT conversions into perpetual-life REITs (non-traded REITs) at the end of the DST's hold period.

Under this structure, investors receive potentially illiquid REIT (real estate investment trust) operating partnership (OP) units instead of cash.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

This memo outlines the key risks of forced UPREITs (umbrella partnership REITs) and explains why investors should prioritize traditional DSTs or DSTs with fully optional 721 UPREIT elections.

Here are four key risks of forced DST 721 UPREIT conversions:

1. Loss of control over exit

In a forced DST 721 UPREIT scenario, investors have no choice in the exit strategy — you must exchange your DST interests for REIT operating partnership units on the sponsor's terms​.

The timing and terms might not align with your personal financial strategy, and you effectively lose flexibility to choose whether or when to cash out or continue deferring taxes.

Investors are essentially locked in to the UPREIT without the ability to change course or pursue a different 1031 exchange at sale​.

Investors who participate in a forced 721 UPREIT put themselves into a situation in which they won't be able to evaluate the health of the final-destination REIT at the time of the 721 transaction.

This is problematic because the final-destination REIT might appear healthy at the time of the DST transaction, but when the DST is called into the 721 exchange transaction in a few years, the final-destination REIT could potentially have a completely different financial picture and risk profile.

2. Limited liquidity and redemption risks

Non-traded, perpetual-life REITs resulting from a 721 UPREIT conversion offer very limited liquidity compared with a straightforward property sale. The partnership units you receive are illiquid — they're not publicly traded and can't be quickly converted into cash.

While many non-traded REITs offer periodic redemption programs, those programs are typically restricted and not guaranteed as per the REIT's offering documents. Such share redemption plans can be capped, oversubscribed, even suspended, especially in times of market stress​.

Regulators often caution investors that non-traded REITs often involve a lack of liquidity and sometimes include uncertain early redemption provisions for investors.

In a forced UPREIT, this means you could be unable to liquidate your investment on your own timetable. Even worse, if many investors seek to redeem, the REIT might simply halt redemptions, as has occurred with some large perpetual-life REITs.

You give up the assured liquidity of a sale, and your ability to cash out depends on the REIT's limited redemption policies (which the REIT can alter or pause at its discretion).

Many of the largest non-traded perpetual-life REITs have gated their liquidity provisions. Investors who might have been told they would have access to liquidity by their financial adviser can be stuck with an illiquid real estate offering. It could take them months or years to access liquidity.

3. Valuation opacity

A perpetual-life DST-sponsored REIT often uses internally assessed net asset values (NAVs) for its shares, which introduces valuation opacity.

Since there is no active market setting a transparent price, investors must rely on sponsor-provided and commissioned appraisals or NAV calculations, which can lack the transparency of open market pricing​.

In a forced conversion, you surrender a straightforward payout (sale proceeds at market value) for an opaque stake in a larger portfolio.

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Determining what your new REIT units are truly worth can be difficult, and the valuation can be subject to conflicts of interest, as the sponsor is on both sides of the DST-to-REIT transaction. This opacity can obscure whether you're getting fair value for your DST property.

In contrast, a direct property sale to an unaffiliated third party establishes a clear market value for your investment.

4. Tax deferral risks

While a 721 UPREIT conversion itself is generally not a taxable event, it can introduce complex tax risks down the line.

Once you hold REIT operating partnership (OP) units, you can no longer do a 1031 exchange on that investment, as OP units don't qualify as like-kind property for 1031 purposes.

This means a forced UPREIT effectively cuts off your ability to continue deferring capital gains tax via future 1031 exchanges.

As a result, your tax deferral will end when you eventually liquidate your REIT units. Any conversion of your OP units into REIT shares or cash redemption is a taxable event that will trigger the capital gains you had deferred​.

In other words, the tax bill is delayed but not eliminated, and you'll encounter it again when exiting the REIT. You'll also lose control of the timing of that taxable event.

If the REIT later forces a merger or compels conversion of your OP units to common shares, you could be hit with a poorly timed taxable capital gain.

There is also the risk that the REIT's operating partnership might sell the underlying property you contributed, and without careful structuring or tax protection agreements, such a sale could unexpectedly trigger taxable gains to you as an OP unit holder​.

In summary, a forced UPREIT can create an inevitable tax liability and take away the 1031 exit ramp that DST investors often rely on to continually defer taxes.

Many DST 721 UPREIT sponsors clearly state in their offering documents that they won't provide a tax protection agreement to their investors.

This would leave the investors exposed. If the REIT were to sell its DST property that the DST investors contributed via a 721 exchange to the REIT, it would be forced to pay capital gains taxes on that contributed property.

In part two of this series, I will discuss the flip side of these forced conversions and describe why I firmly believe fully optional UPREIT conversions are far superior and what investors should be aware of before investing in any 721 UPREIT exchange.

Related Content

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• How to Use DSTs and 1031 Exchanges for Diversification
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• Six Risks of Delaware Statutory Trusts in 1031 Exchanges

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Rumors of the death of the 60-40 portfolio — that old standby allocation of 60% stocks and 40% fixed-income investments — are premature. A portfolio that held 60% of its assets in U.S. stocks and 40% in bonds has performed well recently, with returns of 16% and 18%, respectively, in 2023 and 2024.

“Quite the contrary — the 60-40 is not dead,” says Paisley Nardini, a portfolio manager and asset allocation strategist with Simplify Asset Management. “If we say it’s dead, we’d also have to say portfolio diversification is dead, and diversification is more important than ever these days.”

In the recent stock selloff, for instance, a 60-40 portfolio would have lost 4% — less than the 9% decline in the S&P 500 index from its peak through the end of April.

But many 60-40 investors are still nursing bruises from the beating they received in 2022. That calendar year, a balanced portfolio strategy — which had succeeded for decades as interest rates declined and bonds thrived — got crushed as rising interest rates sent stocks and bonds tumbling in tandem.

That’s rare, though. The last year stocks and bonds both fell was 1969. Even so, the wounds fueled a horde of 60-40 doubters, who argued that the portfolio had gotten riskier. And that spawned a variety of strategies to tweak the 60-40 formula.

Most fixes, but not all, involve adding so-called alternative investments to the portfolio. These investment strategies offer investors a way to diversify beyond stocks and bonds.

“A 60-40 portfolio is a two-legged stool,” says Nardini. Adding alternatives — a third leg — can provide increased stability, especially now with the stock market taking a breather and sticky inflation weighing on the bond market.

However alternative strategies come with several caveats. There are numerous approaches, and many are complex. The broad group includes strategies that invest in private stock or bond markets, hedge market returns, or invest in real assets, such as real estate, commodities and even digital currencies. These approaches don’t always behave in predictable ways, and some are best used as tactical tilts rather than long-term holdings.

These days, many mutual funds and exchange-traded funds employ alternative strategies, making them easy for do-it-yourself investors to buy and sell. But they’re pricey, charging an average expense ratio of 1.70% (though generally, alternative ETFs charge less). For context, the typical annual fee of U.S. stock funds and ETFs is 0.91%.

A third leg for the stool. If you are thinking of adding alternatives to your portfolio, focus on the goal you want them to accomplish, and invest accordingly.

“At the very least, you want the third leg to behave differently from stocks and bonds. Otherwise, why are you taking on the risk?” says Nardini.

To help you meet your objectives, we’ve highlighted below some easy ways to add an alternative strategy to your balanced portfolio. Prices, returns and other data are as of April 30.

Enhance income

Real estate investment trusts, or REITs, are one alternative asset class you can hold forever, says Jonathan Lee, a senior portfolio manager at U.S. Bank Private Wealth Management in St. Louis. They pay big dividends — tax rules require REITs to pay out a minimum of 90% of taxable income — and there’s the promise of share price gains, too.

What’s more, REITs are considered good inflation hedges because property values and rents tend to move up with rising prices, says Mayukh Poddar, a senior portfolio manager at Altfest Personal Wealth Management in New York City.

What they don’t offer is lower volatility. Over the past decade, REIT funds have been slightly more volatile than the S&P 500.

Baron Real Estate Income (BRIFX) boasts below-average volatility and an annualized three-year record that beat 93% of its peers. It charges a 1.05% annual expense ratio. The fees for ETFs Real Estate Select Sector SPDR (XLRE) and Invesco S&P 500 Equal Weight Real Estate (RSPR) are considerably lower. Both index-based funds beat more than 60% of their real-estate fund peers over the past three years.

Infrastructure funds are also prized for generating stable income. These funds invest in companies that own, operate, or are involved in the development and service of infrastructure-related assets, many of which provide an attractive income yield backed by secure and sustainable cash-flow streams. Think airports, highways, railroads, utilities and electricity storage.

According to Nuveen chief investment officer Saira Malik, global infrastructure stocks have historically provided a buffer to inflation, too.

Fidelity Infrastructure (FNSTX) is an actively managed fund with a three-year annualized return of 5.2%, which beat 71% of its peers. It yields 1.3%. iShares Global Infrastructure ETF (IGF) yields 2.8%, and its annualized return of 8.1% over the past three years beat 82% of its peers. Both funds held up better than the S&P 500 in the recent selloff and in 2022.

Boost diversification

Managed futures strategies “have the lowest correlation to stocks and bonds,” says Nardini. In a managed futures fund, a professional builds a diversified portfolio of futures contracts in a variety of assets — bonds, stocks, commodities and foreign currencies.

These strategies shine when stocks and bonds are faltering. In 2022, the typical managed futures fund gained 24%. But they dim when stocks soar. In 2023 and 2024, for instance, the typical managed futures fund lost ground or was flat.

And if long-term returns and volatility are any clue, they’re best used during periods when you’re pessimistic about the market’s trajectory and you want to provide your stock portfolio with a cushion against downturns.

Over the past decade, the typical managed futures fund posted a slim, 1.8% annualized return. That just barely beat the Bloomberg U.S. Aggregate Bond index, and it was twice as volatile.

Simplify Managed Futures Strategy (CTA) uses a rules-based strategy to identify price trends and invest in futures contracts in stocks, bonds, currencies and commodities. Over the past three years, the fund’s 9.6% annualized return ranked in the top 1% of its peers. And during the recent selloff in stocks, Simplify Managed Futures Strategy ETF lost 6% (compared with the S&P 500’s 9% drop).

Gold also tends to move up when stocks fall. For instance, iShares Gold Trust (IAU) gained 12.4% during the recent stock selloff. And in 2022, the ETF was essentially flat, with a 0.6% loss, while the S&P 500 lost 18%.

Lower volatility

Alternatives can help a 60-40 portfolio during periods of “big spikes in volatility,” says Megan Horneman, chief investment officer at Verdence Capital Advisors. To hedge stock risk — which accounts for about 90% of the volatility in a 60-40 portfolio — she suggests adding a market-neutral fund. These funds vary in approach, but the common thread is they move to their own beat, independent of the stock market. Low volatility and steady (albeit modest) returns are common characteristics.

One of the steadiest market-neutral strategies is merger arbitrage, which involves buying stocks in soon-to-be-acquired companies after a deal has been announced. The fund earns a profit on the difference between the post-announcement price and the price when the deal closes.

Not all transactions are consummated, however, and longtime managers Roy Behren and Michael Shannon at the Merger Fund (MERFX) have proved that they have a knack for identifying deals that do. Over the past three years, the fund’s 3.9% annualized return beat 67% of its peers. In 2022, the fund was flat, with a 0.7% return. You can buy shares without a load or a transaction fee at Fidelity and Schwab.

Tweak the formula without adding anything new

There are ways to adjust your 60-40 portfolio without adding alternatives.

Rethink your core bond holdings, for a start. The Bloomberg U.S. Aggregate Bond index has a current duration (a measure of interest-rate sensitivity) of a little less than six years. Bond prices and interest rates move in opposite directions, so a duration of six years implies that if interest rates rise by one percentage point, a fund’s net asset value will fall by 6%.

A tilt toward short-term debt (with maturities of one to three years) in your bond holdings can lower the overall interest rate risk of your portfolio and potentially reduce volatility, too, according to a report from Intrepid Capital, an investment management firm in Jacksonville Beach, Fla.

Plus, these days, you don’t have to sacrifice much in the way of yield, despite a recent rise in long-term yields. Recently a one-year government note yielded 3.9% and a 10-year bond yielded 4.2%.

Our favorite short-term bond mutual and exchange-traded funds are Vanguard Short-Term Investment-Grade (VFSTX) and iShares Short Duration Bond Active (NEAR). Both funds hold a mix of corporate and government debt, boast short durations, and have better than 4.5% yields.

You can also boost diversification in your 60-40 portfolio simply by focusing on neglected parts of the market, such as health care and international stocks. Both kinds of shares outperformed the S&P 500 from the start of 2025 through March.

“Diversification has been the enemy of portfolios for the past 10 to 15 years,” says Simplify Asset Management's Nardini, “but we see a tailwind in the future for diversifiers in a portfolio.”

Another strategy is to adjust the ratio of stocks and bonds within the portfolio. Jim Paulsen, a longtime stock strategist who writes about the economy and financial markets in Paulsen Perspectives, recently studied the performance of a 60-40 portfolio against a 100% stock portfolio and found that when the 10-year Treasury yield hovers around 4% — though it has been on the rise — a 60-40 portfolio has delivered returns that hewed close to an all-stock portfolio, with lower volatility.

But when the 10-year yield falls below 4%, investors may want to tilt more toward stocks — say, a split of 70% stocks and 30% bonds — because historically, lower yields have generally translated into paltry bond returns. Conversely, if the 10-year yield rises well above the 4% mark — say, in the 6% range, as it did in the ’00s — an even split between stocks and bonds may be in order.

Paulsen admits this approach requires some work, and depending on your tolerance for risk, it may not be appropriate for you. (It also may work best in a tax-deferred account to avoid capital gains taxes as you adjust your portfolio.) But “it may prove profitable,” too, he says.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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In today’s complex real estate market, understanding the nuances of 721 UPREIT DST structures is essential for any investor.

One of the critical features of these arrangements is that the REIT holds the option — but not the obligation — to purchase the DST’s property through the UPREIT strategy. This subtle distinction can have profound implications for investors, making due diligence not just advisable, but critical.

The anatomy of a 721 UPREIT DST structure

In a typical 721 UPREIT DST transaction, a property is initially transferred into a Delaware statutory trust (DST), allowing investors to acquire a beneficial interest in real estate without directly managing the asset via a 1031 exchange.

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Later, the REIT may choose to acquire the property from the DST. However, because the REIT only has the option to execute this purchase and is not obligated or compelled to do so, the decision rests entirely in the hands of the REIT.

This arrangement means that while investors might be enticed by the benefits of 721 UPREIT DST investments — such as tax advantages and a passive income stream potential — they also bear certain risks.

One key risk could be that the REIT may decide to mark up the purchase price of the property when transferring it from the DST to its own portfolio, regardless of changing market conditions.

The importance of market timing and due diligence on 721 UPREIT investments

Imagine a scenario where a REIT acquires a property for $100 million in 2022. Over the next couple of years, macroeconomic factors — particularly rising interest rates — cause the property’s market value to decline by 20%.

By 2024, the property is realistically worth only $80 million. Despite this downturn, some REITs may opt to mark up the property’s price by 20% based on their original 2022 acquisition cost.

This maneuver results in DST investors being charged $120 million for an asset that, in current market conditions, is worth significantly less at just $80 million.

This example underscores a critical point: Since the REIT is not obligated to acquire the property in a 721 exchange from the DST investors, it can delay or even forgo the transaction if market conditions deteriorate further.

In such cases, investors could find themselves locked into a DST investment with inflated valuations and misaligned expectations.

Understanding valuation and markups: Crucial items for 721 UPREIT investors to consider

One of the first questions an investor should ask is whether the DST they’re considering has been subject to a markup by the REIT — and if so, by what percentage.

Often, these REITs, already in possession of the property, sell it to the DST at a marked-up price that can sometimes exceed 20% (this is often referred to as a “non-arm’s length transaction”).

A significant markup can be a red flag, suggesting that the underlying asset may be overvalued and that hidden fees could be eroding potential returns. While such markups are disclosed in the fine print of the private placement memorandum, they are often omitted from the estimated use of proceeds table.

This omission makes it challenging for investors to track the true cost basis and understand the complete financial picture, thereby increasing the risk of misaligned expectations over time.

The critical role of expertise in navigating 721 exchange UPREITs

Given these complexities, investors must exercise caution and thoroughly assess both the acquisition price that the REIT purchased the property for and the subsequent markups that they are passing along to DST investors.

Market conditions are dynamic, and properties that were once market value can quickly depreciate due to economic shifts, such as changes in interest rates.

With the REIT’s ability to exercise or not exercise its option at a time of its choosing, the risks associated with overvaluation become even more pronounced for 721 UPREIT DST investors.

Conclusion

The flexibility inherent in 721 UPREIT DSTs, while offering significant benefits, also introduces a layer of risk that must not be underestimated. Investors need to be acutely aware that a REIT’s option but not obligation to acquire a property could lead to situations where market values and marked-up prices could truly impact an investor.

This divergence underscores the necessity of due diligence on 721 UPREIT DSTs and investments — ensuring that investors are informed about the markups, the timing of market changes and the underlying financial risks.

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Ultimately, due diligence never guarantees a profitable investment, and all 721 UPREIT and DST investments could result in a full loss of principal invested. This is the reason that trying to understand exactly what is going on at the 721 UPREIT DST and the final REIT destination is crucial.

I spend a great amount of time understanding these intricate details in order to share the implications of them with our investors. After nearly two decades of experience in the 1031 exchange and 721 UPREIT DST space, I have learned that thorough due diligence is the key to making informed investment decisions.

Unlike many financial advisers, wealth managers, RIAs and even DST brokers, I make it an imperative to delve into the fine print and scrutinize the markups and valuation methodologies that can often be overlooked.

Understanding the option but not the obligation — and knowing when and how that option might be exercised — can be the difference between a profitable investment and a costly misstep.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Real estate has much to offer as an investment class: cash flow, tax advantages, a source of returns that's differentiated from both stocks and bonds.

Thank goodness for real estate investment trusts (REITs).

The average investor simply doesn't have the resources to pursue some of the most common forms of real estate investment.

Most people can't afford to buy, say, an apartment complex or office building in cash.

They also likely don't have the liquid funds necessary to invest via private equity.

Yes, they could access real estate crowdfunding systems and other apps … but only if they have enough to meet their sometimes lofty investment minimums.

Publicly traded REITs, however, allow us to invest conveniently through our brokerage accounts for the price of a single share — often just $20 or $30.

Today, we'll examine the real estate sector, which is made up of real estate investment trusts.

We'll define the sector, explain why people might want to invest in these companies and finish by showing you how to find the best REITs to buy.

What are REITs?

Real estate investment trusts are a bit different than your typical Wall Street company.

REITs are a special class of company that was written into being decades ago when then-president Dwight D. Eisenhower signed the Cigar Excise Tax Extension of 1960. The purpose? To allow regular investors to invest in real estate the same way they'd been able to invest in industrial stocks, retailers and utility stocks.

Most REITs own and sometimes even operate physical real estate — everything from apartments, offices and industrial parks to hotels, hospitals and data center buildings — and make their money by leasing those properties out to tenants.

That said, there is a subclass of REITs, called "mortgage REITs" (mREITs), that don't own physical real estate, but instead real estate assets such as mortgage-backed securities (MBSes) and collateralized loan obligations (CLOs).

REITs stand out from other types of companies in that they enjoy an exemption from federal income tax.

In return for this favorable treatment, they must return most (at least 90%) of their taxable income back to shareholders in the form of dividends.

As you'd imagine, that results in the real estate sector offering up stocks with some of the highest dividend yields on Wall Street.

Why do investors buy REITs?

REITs provide a bounty of advantages, though arguably chief among them is their income potential.

Real estate is typically among the highest-yielding sectors, if not at the very top of the mountain:

REITs also provide diversification, in more than one way.

For instance, real estate cycles tend to look different (namely, they're longer by a few years) than the average stock market cycle.

Unsurprisingly, their performance often doesn't mirror stocks and bonds, providing some waggle when one or both of those two assets wiggle. Coleman Dunleavy Wealth Management Group, says:

"Over the 10-year period ending in 2023, equity REITs had a 76% correlation with the S&P 500 and 56% correlation with the corporate and government bond market. Correlations are even lower over 30 years."

REITs also can come in handy when battling an inflationary environment. For better or for worse, few businesses can easily force through price hikes than real estate.

As apartment renters no doubt noticed shortly after COVID made its presence felt, landlords were willing and able to substantially hike their monthly ask.

Corporate renters often don't even have the ability to push back — in many cases, REITs will embed annual rent escalators into their contracts with tenants, which helps their income keep up with inflation.

REITs are by far and away the easiest-to-access method of real estate investing on the planet.

No direct property ownership. No property management. No separate app for just your real estate investments. Just a few additional holdings in your brokerage account or individual retirement account (IRA).

How to find the best REITs

We can't predict exactly what you might want out of REITs, but we can help you start your search with a basic quality screen.

To get to the following list of the best REITs to buy, we've looked for firms within the sector that:

Are within the S&P 1500. The S&P 1500 is made up of the S&P 500, S&P MidCap 400 and S&P SmallCap 600.

In other words, we're not just looking for large-cap stocks — if mid- and small-cap REITs make the grade, we should consider them, too.

Have a two-year estimated AFFO growth rate of at least 5%. One way in which REITs differ from other sectors is that they're less concerned with typical earnings, and more concerned with funds from operations (FFO).

FFO is a REIT-specific metric that measures cash flow generated by a REIT's core business activities. This speaks not just to the company's success, but its ability to pay dividends.

Here, we look at estimates of "adjusted" FFO, which typically backs out one-time accounting events.

Have a dividend of at least 3%. Income is one of investors' primary demands of REITs, so it makes sense to seek out a well-above-average yield in our screen.

At a minimum of 3%, we set a baseline for yield that's more than twice what we get from the broader market.

Have at least 10 covering analysts. We'd like to look at stocks that are on Wall Street analysts' radar, which makes it likelier that there's both more reporting and more insights on these companies.

The more research we have at our disposal, the more educated a decision we can make.

Have a consensus Buy rating. All of the REITs must have an average broker recommendation of 2.5 or less within S&P Global Market Intelligence's ratings scale.

S&P Global Market Intelligence converts analysts' ratings into a numerical scale.

Anything with a score of 2.5 or less is considered a Buy. Stocks with a rating of 1.5 or lower are Strong Buys.

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It's no secret the market looks pricey by historical measures, but that doesn't mean there are no Buy-rated bargain stocks to buy.

We're all more than aware that the S&P 500 is trading at lofty valuations by a number of measures. How often have we been told that the market's forward price-to-earnings ratio (P/E) – the S&P 500 currently trades at 22 times next-12-months earnings – is perilously close to its historical high?

Indeed, as Savita Subramanian, head of U.S. equity strategy and U.S. quantitative strategy at BofA Global Research, notes: "On 19 of 20 metrics, the S&P 500 is trading at statistically expensive levels."

But that doesn't mean there are no bargains to be found. After all, as the cliche goes, it's not a stock market; it's a market of stocks.

To that end, we screened the S&P 500 for the best bargain stocks to buy, according to industry analysts. We sussed out high-quality names with cheap share prices on a relative valuation basis. We further limited ourselves to stocks scoring a rare consensus Strong Buy recommendation, according to data from S&P Global Market Intelligence.

We then dug into analyst research and recent returns to find three of the most promising names, which might surprise you. Tech and communication services stocks may get all the attention, but there's value to be found in the consumer discretionary, energy and materials sectors.

Hasbro

• Market cap: $11.6 billion
• Dividend yield: 3.4%
• Forward P/E: 15.8

Hasbro (HAS) has become something of a poster company for weathering trade shocks. The toymaker not only manufactures a significant portion of its products in China, but the Middle Kingdom is also a major market. Indeed, Hasbro recorded more than $1 billion in non-cash goodwill impairment charges this year due to the impact of tariffs.

And yet, shares have shaken off the shock, gaining more than 50% so far in 2025. Even better, analysts say Hasbro's valuation remains compelling, suggesting even more upside ahead.

"The company has consistently delivered on earnings and has topped estimates for the past seven quarters," notes Argus Research analyst Christine Dooley, who rates HAS stock at Buy. "It delivered again this quarter despite retailers delaying orders due to tariffs and economic uncertainty. The business is on track and fundamentals are good."

HAS stock goes for less than 16 times expected earnings – below its own five-year average P/E, and at a roughly 30% discount to the broader market, according to LSEG Stock Reports Plus. In addition to looking like a bargain, HAS offers an attractive dividend with an implied yield of 3.4%.

Of the 14 analysts covering the stock surveyed by S&P Global Market Intelligence, 10 rate it at Strong Buy, two call it a Buy and two have it at Hold. That works out to a consensus recommendation of Strong Buy.

SLB

• Market cap: $53.3 billion
• Dividend yield: 3.2%
• Forward P/E: 12.5

Bulls say SLB (SLB), the oilfield services giant formerly known as Schlumberger, has a unique ability to ride out subdued industrywide demand. True, shares are off about 5% so far this year, but that only makes the valuation more compelling.

Thanks to its $7.8 billion acquisition of ChampionX in July, and its diversification into offering digital services and data centers, SLB should be able to "navigate the environment until spending ramps back up," writes Susquehanna analyst Charles Minervino, who rates shares at Positive (the equivalent of Buy).

Accelerating international markets and pricing momentum provide upcoming catalysts to the energy stock, the analyst notes.

Meanwhile, SLB's price appears to be right. With a forward P/E of 12, SLB trades at a 25% discount to its own five-year average, as well as a discount of almost 50% to the broader market.

By price-to-sales, SLB trades at even steeper discounts to those benchmarks.

Then there's all the cash SLB is returning to shareholders. The company reaffirmed its plan to spend $4 billion on share repurchases and dividends in 2025, up from $3.27 billion in 2024.

Of the 30 analysts covering SLB, 19 call it a Strong Buy, nine say Buy and two have it at Hold. That translates to a consensus recommendation of Strong Buy.

Smurfit WestRock

• Market cap: $18.7 billion
• Dividend yield: 4.8%
• Forward P/E: 10.7

Smurfit WestRock (SW) shares have lost about a third of their value so far this year, but bulls argue that this leaves them trading at bargain-basement prices. After all, the company is still finding its feet.

SW was formed by the 2024 merger of Smurfit Kappa and WestRock Company, creating the world's largest paper packaging company. Smurfit WestRock's operations in 40 countries make it the revenue leader in the world of corrugated cardboard, containerboard, consumer packaging and more.

"We rate SW at Buy given its leading industry position in North American containerboard, allowing it to capitalize on the improving containerboard cycle, which we believe is entering a 'golden age' driven by balanced supply and demand," writes Truist Securities analyst Michael Roxland.

Moreover, SW expects $400 million in synergies (also known as cost cuts) as a result of the merger.

With a forward P/E of less than 11, SW trades at an 11% discount to its own five-year average, according to LSEG Stock Reports Plus. That valuation also represents a discount of 50% to the broader market. The dividend yield, at 4.8%, is pretty spicy compared to the S&P 500's yield of 1.2%.

Of the 16 analysts covering the materials stock, 11 rate it at Strong Buy and five have it at Buy. That works out to a consensus recommendation of Strong Buy.

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When it comes to retirement planning, income planning is typically the first point of discussion. Can you afford to retire and enjoy the lifestyle you want with the resources you have? What seems like a straightforward question has become anything but.

The reality is that there is no such thing as a perfect investment, product or strategy. You cannot avoid risk. Even the guaranteed lifetime income stream from an insurance company has inflationary risk. If taxes were to go up, the net income you would get from your annuity income, assuming it was funded with pre-tax dollars, would go down. Those are two risks among many others that are associated with that one strategy. The point here is we are all subject to risk in one way or another.

In an attempt to bring balance to the retirement income conversation, I want to share 10 common income strategies you can consider when putting together your retirement plan.

You do not need to go all in on one or two strategies. In many situations, it makes sense to blend multiple strategies. Just like you would diversify a portfolio to help lower your risk, you may want to consider diversifying your income strategies to help lower risks associated with your desired quality of life in retirement.

1. The encore career

If we define retirement as the ability to spend your time how you want, then you may consider taking a full-time or part-time job in retirement that gives you purpose. Instead of working for money, consider working for the cause.

Benefits: Twenty-eight percent of retirees report they feel depressed. Whether you need the money or not, the encore career, also called a second act, may be able to help you emotionally transition into retirement. For those who may not have enough savings to retire, the encore career may be able to bridge the gap so you can spend your time doing work you enjoy.

Drawback: You’re working in retirement when you might prefer to relax, travel and spend more time with family, friends and hobbies.

2. Social Security benefits

Social Security is not intended to take care of all your needs in retirement. It is important to understand that when you file will affect more than just your income. It can also affect your taxes and estate. (For more about this, read my article Social Security Optimization If You Save More Than $250,000.)

Benefit: Social Security supplements your retirement savings. You can collect it if you’ve worked and paid Social Security taxes for at least 10 years (specifically, if you have earned at least 40 credits).

Drawbacks: Generally speaking, if you file for your benefit too early, your overall income could be hurting. However, if you file too late, you could hurt your overall estate.

Social Security optimization, in my opinion, should be treated as a holistic, or comprehensive, conversation and not an isolated strategy to try to get the most money back. You don’t want to jump over dimes to pick up pennies.

3. Pension

Pensions may be one of the lowest-risk retirement income strategies on this list, which is why many people who are offered a pension take it. However, a pension does have a few detriments. Since a pension is taxed as income, if taxes go up, your net-of-tax pension income would go down. Also, if inflation goes up, your pension may become less valuable over time.

Benefits: If you want a simple income strategy and are offered a pension, then taking the lifetime income may be right for you. If taxes or inflation are a concern, you may consider taking the lump-sum option, assuming it is being offered. The lump-sum option would allow you to be more proactive with your tax planning (e.g., IRA to Roth conversions, etc.). You would also have more control over your legacy intentions. The financial freedom the lump sum offers requires additional risk and responsibility.

Drawbacks: Those who take the pension option have tax and inflationary risks. Those who take the lump-sum option are subject to market risk, sequence of returns risk and more. Are you comfortable inheriting the additional responsibility and risks? (More about sequence of returns risk in No. 6 below.)

4. Lifetime income from annuities

The best definition I can give of an annuity, when used as a source of lifetime income, is the transference of longevity risk to an insurance company. If you live long enough, it may be financially worth it. However, the numbers are on the side of the insurance company. An annuity is not an investment. It is an insurance product. The annuity income stream is not intended to make you more wealthy.

Benefit: If you are more concerned about outliving your money and less concerned about your legacy planning, inflation risk and liquidity in case of expensive life events, annuities may be for you.

Drawback: If you are more concerned about maintaining flexibility while growing your assets, the annuity income strategy may not be right for you.

5. Real estate income

The three most common real estate investments I see are:

• Self-managed investment real estate
• Privately traded real estate investment trusts (REITs)
• Delaware statutory trusts (DSTs)

Publicly traded REITs don’t work for this group because they are structured and behave more like a mutual fund than a pure real estate investment, in my opinion.

Benefit: These three real estate investment options have the ability to offer cash flow while they can appreciate in value.

Drawback: It can be hard to sell a property, making liquidity a problem. Privately traded REITs can be redeemed only a few times a year, depending on the REIT, and even then, it may not go through. DSTs are illiquid, typically, for about six to 10 years.

6. The 4% rule

The 4% rule suggests that you can take about 4% from your portfolio each year and you should be fine. It is based on the idea that you can focus your portfolio on long-term growth and take the income you need from the growth.

Benefits: The 4% rule provides high growth potential overall and great flexibility. If you are focused on growing your wealth for legacy purposes, this may be for you.

Drawback: Sequence of returns risk is an issue. Basically, if you were to take income from your accounts during a time when they had lost money, you would amplify the loss, making it more difficult to recover. This is called sequence of returns risk. (For more about sequence of returns risk, read my article Many Retirees Don’t Know About This Major Market Risk: Do You?)

7. Dividends

The dividend portfolio is a traditional retirement income method that suggests you purchase positions that historically have offered competitive and consistent dividends. In this strategy, you hope to maintain the principal while living off of the dividends whenever they come in.

Benefits: The dividend strategy includes the potential growth of the position while it pays dividends. Also, when you pass, your positions could get a step-up in basis, potentially making your legacy planning more tax efficient. Lastly, if you put in enough time and research, you could probably put together a competitive dividend portfolio on your own and save yourself advisory fees.

Drawback: Dividends are not guaranteed. For example, during the COVID-19 pandemic, many companies known for dividends temporarily stopped paying them. That can put a lot of pressure on a retiree whose income strategy relies on dividends.

8. Option contracts

Selling option contracts (covered calls) can be an effective strategy to generate income in retirement, especially when markets are not moving.

Benefits: Selling calls against stocks you already own may help to provide income in retirement income while maintaining your overall portfolio positions.

Drawbacks: If the market moves too much in a certain direction, you could be forced to relinquish your shares and miss out on some of the growth potential. If you do not have experience in trading options, you may want to steer clear of this strategy altogether. I am writing about it here to acknowledge it, not to suggest it.

9. Limited partnerships

Limited partnerships can be an effective way to generate passive income in retirement if given the opportunity, and it makes sense from a risk/potential reward standpoint.

Benefit: Investing in a limited partnership makes you part-owner of a business venture without having to take on the day-to-day responsibilities of managing it.

Drawback: Be mindful of the health of the company/partnership and the risks you are taking before you invest.

10. The reservoir

I teach “the reservoir strategy” in my book, How to Retire on Time. This strategy is intended to complement any of the strategies listed above. Just like a city has a reservoir of water in case of a drought, I believe that any retirement portfolio should have a “reservoir” of assets that have growth potential and principal protection. That way, if the markets go down, dividends dry up or something else happens, you can keep income coming in without amplifying losses.

There are seven investments or products that I have found work well with this strategy: CDs, treasuries, fixed annuities, fixed indexed annuities, indexed universal life insurance, buffered ETFs with a 100% buffer and principal-protected (structured) notes. They each have their place within the reservoir strategy. When implemented correctly, you would typically see a blend of these products based on your liquidity needs and overall retirement plan.

Benefit: You may be able to focus more of your overall portfolio on long-term growth. When implemented correctly, you should be able to maintain your income, even when markets are down, without accentuating your losses. Basically, the reservoir can help you hedge against market crashes and flat-market cycles.

Drawback: In order to get growth and protection in any investment or product, you’ll have to give up liquidity for a certain period of time. Make sure you always maintain enough liquidity so you can keep your income coming in regardless of market conditions.

Conclusion

It can be tough to try to figure out which strategies are right for you. If you talk with someone who is licensed only in insurance, chances are they will make the annuity sound like it is the best solution. If you talk with someone licensed only in securities, you may get a biased guide trying to persuade you to follow the 4% rule or something similar.

Instead of getting “sold” a product or portfolio, consider taking the following steps:

• Put together your lifestyle and legacy plan. Find a way to articulate what you want before anything else.
• Consider all the potential pitfalls and inefficiencies you may be facing. You may want to take time earmarking certain tax minimization or other strategies focused on efficiencies that may be able to help you get more out of your hard-earned money.
• Design a portfolio that supports your lifestyle and legacy goals and is able to implement a blend of the income strategies discussed above.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

As co-founder of real estate private equity investment firm Hamilton Point Investments, I believe the current perpetual non-traded REIT (real estate investment trust) structure creates certain concerns that investors should be aware of and take into consideration.

Non-traded REITs proliferated in the decade after the real estate crash of 2008-09. Individual investors placed money with these groups largely through independent financial advisers and, in return, were told to expect distributions for a number of years after which the REIT would pursue liquidation of the portfolio or list to go public. The focus and energy were on raising equity, with investment and operations seemingly an afterthought. Their results were poor, underperforming public REITs and direct, private investments, with numerous examples of complete losses of investment.

After the collapse of American Realty Capital in 2014, other failures and accompanying arbitration awards led to a dramatic decline in non-traded REIT investment. Several years later, though, a number of large publicly traded financial firms entered the space, raising huge amounts of equity through the name-brand wirehouses instead of independent broker-dealers. A twist from the previous non-traded REITs is that this new structure is perpetual, with no planned exit.

While these newer sponsors differ in that they are experienced real estate investment companies with the institutional knowledge, infrastructure and track record to be successful, there are considerations investors in these perpetual-life non-traded REITs should be aware of.

Issues that investors need to know about

Share valuation issues. Current non-traded REITs offer monthly or quarterly share valuations, which are used to calculate both the price at which new investors come in and at which existing investors may endeavor to redeem and cash out. The share transaction price, or net asset value (NAV) per share, is solely determined by the company, which employs third-party valuation advisers, but the ultimate NAV is at the sole discretion of the company and is portrayed as exact.

NAV calculations are not exact and can be far from. Take for example a property declared to be worth $100 million. This is an approximation. No matter how experienced and smart the REIT principals are, that $100 million really means somewhere between, say, $95 million and $105 million. Leverage, in turn, magnifies that disparity. If the above property has 50% leverage, the equity is $50 million. If the ultimate value of the property is $95 million, that equity is worth $45 million. At $105 million, the equity is $55 million. This roughly 10% swing in property value, leveraged, translates to closer to a 20% swing in share equity value. NAV calculations are a good guess of what the share price should be, but they are far from perfect.

Legacy assets acquired at market peak pricing. When investing in a perpetual-life non-traded REIT, one is not investing in the real estate market as it sits now. A good portion of the real estate may have been purchased several years ago, which currently coincides with the peak of this last market pricing run-up. Some non-traded REITs have been slow to adjust their valuations — where overall commercial real estate values have fallen around 20% since November 2022, some non-traded REITs have stated much lower declines, perhaps materially light even taking into account different property-type allocations.

Current investors in a perpetual-life vehicle may believe they are getting into the market at this attractive time, taking advantage of the pricing correction that occurred over the last two years. But with many of those properties purchased at 2021 and 2022 market peak pricing, the assets are likely worth less now than what was paid for them.

While hotels and student housing bought in 2021, for example, may have been good investments as the COVID pandemic beat those property types down, conventional apartments and industrial/warehouses were likely much less so. There could be a good reason why the REIT’s legacy investments are currently attractive. Just don’t take the often shared “it’s better real estate” or “we’re really good managers” as a sufficient answer.

Questionable liquidity. Liquidity (the ability to get one’s investment capital back) in newer perpetual-life non-traded REITs is touted as sort of “no problem,” with passing reference to quarterly liquidity up to some percentage of assets. However, as we’ve seen over the last year, the ability to get your money back and the price-determining mechanism for such are not ideal.

While liquidity is offered, in practice an investor essentially must apply for an equity redemption, which could be approved fully, in part or not at all. Potential investor need for liquidity aside, this removes an important ability of investors to react quickly to changing market conditions, up or down, or changing views of the sponsor.

Dilutive nature of redemptions. Redemptions if met often strain the finances of the non-traded REIT to the detriment of remaining investors. The older REITs, which underperformed, at least had a stated target of company liquidation or public listing after some period. With today’s perpetual non-traded REITs, you get liquidity at the REIT’s sole discretion.

Often the REITs do not have the cash to perform on redemptions, requiring dilutive repayment of current equity with capital coming in from new investors. Note there is a cost of new equity in the form of commissions to financial advisers, so the net new cash to the REIT will always be less than the amount of cash redeemed.

Another way REITs handle redemptions may include sales of assets into poor market conditions or placing of new debt on properties at high interest rates.

None of these equity redemption methods is helpful to the remaining shareholders.

Conclusion

The major sponsors of today’s largest perpetual-life non-traded REITs are generally successful groups with decades of experience successfully managing institutional equity in closed-end real estate funds. They’ve got the institutional capabilities needed for success and strong track records. However, the four structural concerns noted above regarding perpetual-life non-traded REITs are only just now being tested, and the jury is out on how well it will go.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Creating steady income streams is the key to financial stability in retirement. A recent report from the National Institute on Retirement Security found that 55% of Americans fear they can’t achieve financial security in retirement. Historically, retirees have been able to rely on pensions and Social Security for income, but times are changing. According to this year's annual Social Security and Medicare trustees report, it’s estimated that retirees will receive only 83% of their benefits beginning in 2035. With the fate of these programs unclear, it’s becoming increasingly important to generate multiple income streams of your own in retirement.

As you’re planning for retirement, it’s important to understand the difference between active income and passive income. Think of active income as an exchange. It’s the money you’ve earned in exchange for your time and services. Passive income is the opposite. It’s earned from income-generating assets, such as dividends and interest income, rental income and capital gains on stock investments or real estate.

During your working years earning active income is the focus, but in retirement, earning passive income should take priority.

Earning passive income requires you to change your approach when investing. During your working years, you’re typically investing for growth. The hope is that your assets will increase in value. But as you get closer to retirement, the goal is to have your assets increase in value while also providing you with income.

Earning passive income through real estate

There are several different investments you can make that can generate income. One common method is getting involved in rental real estate. According to data from Pew Research, 72% of single-unit rental properties are owned by individuals. Investors who buy and hold rental property profit from recurring rental income and any potential gains from appreciation when the property is sold or refinanced.

If you’re not interested in administering your own real estate rentals, you can join a real estate investment trust (REIT). A REIT is a company that owns and operates real estate to produce income for stakeholders. REITs include multistory building rentals, office spaces and malls. The investments are long-term, and the goal is to generate income through holding, leasing and renting.

Other passive income possibilities

Aside from real estate, investing into savings accounts, CDs and money market accounts are other options for generating passive income. The rate of return for each varies, but these options have lower risk, which works well for people approaching or in retirement. In addition to being low risk, these investments are typically insured by the Federal Deposit Insurance Corporation (FDIC).

Three withdrawal methods to consider

Identifying multiple passive income streams is only a portion of your income planning. The next step is to create a strategic method for withdrawal. There are several withdrawal methods to choose from, but the strategy you pick should align with your risk tolerance and income needs.

One withdrawal method is the systematic withdrawal strategy. This strategy involves withdrawing a fixed amount regularly from retirement accounts, such as a set percentage of the portfolio balance annually. This method provides a steady stream of income, but it doesn’t account for market fluctuations or changes in expenses.

Another approach to consider is the bucket strategy. With this method, retirees divide their portfolios into different “buckets” based on their time horizon and risk tolerance. Short-term buckets hold cash and investments for immediate expenses, while longer-term buckets hold assets with higher potential returns.

Retirees with tax-deferred accounts, such as traditional IRAs and 401(k)s, also have the required minimum distribution strategy at their disposal. Once you reach a certain age (currently 73, but rising to 75 in 2033), the IRS requires you to take RMDs from these accounts. By using these withdrawals as a baseline, retirees can plan additional withdrawals as necessary.

A different kind of retirement income strategy

Some workers may choose to approach retirement a little differently. Instead of retiring all at once, the staged retirement strategy gives workers the option to gradually transition from full-time work to part-time or consulting roles. While this method falls into the active income category, it can help supplement retirement income while delaying the need to draw down retirement savings.

Creating a plan that provides you with financial security and stability is essential for those hoping to retire. A solid plan can give you peace of mind in the face of market volatility and uncertainty surrounding the future of Social Security. To ensure your income plan meets your needs, consider meeting with a financial adviser. They can give you more information about the various income streams and withdrawal methods that are available, helping you pick an option that works best for you.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Investing in real estate can be a lucrative endeavor, and one way to do it is by incorporating non-traded real estate investment trusts (REITs) within your Roth IRA. This approach allows you to reap the benefits of real estate investments, such as dividends, without the complexities of property ownership and management.

If you're unfamiliar with the concepts of non-traded REITs and Roth IRAs, it’s important to learn how this strategy works as well as potential advantages and considerations. A non-traded REIT is a company that acquires and manages income-generating properties — these could include senior housing, apartments, medical facilities, retail centers, warehouses and hotels.

When you invest in this type of REIT, you become a shareholder, but you're not responsible for the day-to-day property management or individual risks associated with property ownership. To qualify as a REIT, a company must distribute at least 90% of its taxable income to shareholders annually in the form of dividends.

Utilizing your Roth IRA to invest in non-traded REITs

A Roth IRA is a popular choice for individual retirement savings because it offers tax-free growth on contributions leading to tax-free qualified withdrawals at full retirement age. Once you've established a Roth IRA, you have the flexibility to allocate your funds to various investment options, such as stocks, bonds, mutual funds, exchange-traded funds (ETFs) and REITs.

Both Roth IRAs and REITs offer distinct tax advantages that can become even more advantageous when combined. Investing in these REITs within a Roth IRA is a relatively simple process — you purchase REIT shares just as you would with any other securities exchange investment.

As with any investment strategy, it's essential to carefully consider the implications. When investing in REITs, utilizing a Roth IRA can be more tax-efficient than a traditional IRA because contributions are made with after-tax dollars, meaning that any gains, including REIT dividends, can be withdrawn without taxation, provided you adhere to Roth IRA withdrawal requirements.

This approach allows you to prepay taxes and potentially avoid taxation on your investment gains in the future, particularly if you anticipate being in a higher tax bracket during retirement. Ultimately, the choice between paying taxes upfront or later depends on your individual preferences. Typically, REIT dividends are subject to individual taxation as ordinary income, but within a Roth IRA, your investment growth remains tax-free, including REIT dividends.

Benefits of REIT investments in your Roth IRA

One substantial benefit of investing in REITs is the potential to reduce risk by diversifying your overall investment portfolio. Since REITs provide exposure to the real estate market without the need for direct property ownership, investors can diversify their portfolios by choosing REITs that have holdings that are potentially varied among multiple properties, regions or industries, instead of investing in a single property or region, thereby achieving more balanced asset allocation.

Additionally, non-traded REITs can be beneficial for long-term financial goals. While publicly traded REITs offer higher liquidity, allowing investors to access their capital through share sales, non-traded REIT investors typically must await the REIT's liquidation of holdings.

Investors can also use share redemption programs to access their funds. These programs allow investors to redeem shares more quickly than waiting until REIT liquidation. However, these agreements are often only available with restrictions that limit liquidity. REITs can also discontinue share redemption programs without notice.

While the decreased liquidity is a con for many, it can also create more opportunities for long-term financial goals. Investors can plan long-term strategies for their assets instead of making abrupt decisions. Strategic planning could result in higher yields in the future.

Considerations and risks of non-traded REIT investments in a Roth IRA

Like any investment, it's crucial to weigh the pros and cons carefully. When considering adding a non-traded REIT investment, one key factor to ponder is the allocation of your investment portfolio. To maintain diversification and mitigate risk, it's generally advisable not to allocate too much of your portfolio to a single investment or strategy. Overcommitting to REITs may deviate from your initial diversification goals.

Another obvious consideration is that while stocks can be traded daily and easily liquidated, non-traded REITs are not traded on an exchange and are likely illiquid, and investors may not be able to access their funds for a period of time.

Your Roth IRA serves as a retirement savings fund, so it's vital to make investment decisions based on your specific needs and objectives for the long term. All investments entail a level of risk, and understanding the full spectrum of risks can help you make informed choices.

When choosing a non-traded REIT to invest in, thorough research and due diligence are important, whether you do the research yourself or consult a financial adviser or real estate investing platform for advice.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Numerous publicly traded real estate trusts (REITs) have faced challenges in the past year, with returns largely trailing stock market indexes. But REITs that are focused on ground leases — owning the land without owning the buildings that sit on it — have been an exception.

Splitting the ownership of commercial land from the buildings that sit on it isn’t a new idea. In some ways, it’s the same financial structure that medieval royalty used with its subjects. But the democratization of ground leases and their growing popularity is reflective of other kinds of securitization across the economy — creating narrower and more focused return characteristics to suit the needs of different classes of investors.

And with commercial office real estate, in particular, in a prominent state of post-lockdown upheaval, the ability to create a de-risked real estate asset has been warmly embraced by investors.

At present, Safehold (SAFE) is the sole publicly traded ground lease REIT pure play. It will likely be one of several on the market in the coming years, prompting other more traditional REITs to diversify their holdings with land leases.

We’ve already seen this with a mega-deal involving Realty Income and Wynn Resorts. In a transaction valued at $1.7 billion, Wynn Resorts sealed a sale/leaseback arrangement with Realty Income, a traditional REIT, for its Encore Boston Harbor development, a hotel, casino and theater project six miles south of Boston.

Unlocking capital when in need of liquidity

Property owners are using ground leases to unlock capital in areas where liquidity is lacking. With regional banking tightening up lending — even with the specter of lower interest rates — we are now seeing land lease inquiries shoot up. In my own land lease specialty practice, we are fielding more queries from owners and developers in all real estate sectors.

One needs to only look at numbers touted by Safehold. Tim Doherty, Safehold’s head of investments, said in a press release that the company has expanded land lease deals from 12 in 2017 to 130 in 2022, with the value of the portfolio at more than $6 billion. He attributed the growth to a new level of sophistication in the land lease market, adopting strategies such as predictability of lease payments, a move that leads to more efficient pricing. Over the last three months of 2023, Safehold stock was up nearly 40%.

Growing popularity of ground leases has not gone unnoticed. Three years ago, Dallas-based Montgomery Street Partners started a $1 billion REIT targeted on investments in the nation’s top 50 markets. High interest from institutional investors prompted Montgomery Street to expand the pool to $1.5 billion in 2022.

Murray McCabe, a managing partner of Montgomery Street Partners, said in a press release, “The strong demand we’ve seen for GLR’s (ground lease REIT) follow-on equity offering validates our strategy and confirms that ground leases have evolved to become an acceptable and mainstream financing tool.”

Clearly, ground lease investment funds are one of the emerging trends in real estate. Ares Management and real estate private equity firm The Regis Group formed Haven Capital in 2020 to capture growing land lease demand to, in their words, provide “a more efficient form of financing” that helps unlock asset value.

These recent developments, along with overall financing trends within the real estate industry, establish a pattern that’s hard to ignore: Land lease activity, which has grown to a more than $18 billion market in 2022, will only see more deals announced over the next 10 years. By one estimate, the market could be close to $2.5 trillion in the United States alone, providing a substantial runway for expansion.

How does a land lease work?

Long a staple of family offices looking for a steady income and predictable stream from long-held vacant parcels in desirable locations, the land lease has become widely embraced because the vehicle presents a win-win scenario for both the building owner and the landowner.

How does a land lease operate? Typically spanning a term of 50 to 99 years with renewal options, a land lease REIT or sponsor acquires the land from the building owner. This arrangement enables the developer to release crucial capital, directing it toward areas with higher return potential. Simultaneously, the building owner retains full control of the asset while divesting the land beneath it, which, though useful in the development process, provides little return to the overall project. The lease is tailored to fit the project.

The Boston Harbor Development serves as an illustration of the long-standing use of land leases in the hospitality industry. Additionally, this approach has found popularity in retail, health and fitness facilities and fast-food outlets. Now, various industries are recognizing the value of this concept. Ground rent payments include predetermined annual lease increases.

“Proof of concept continues to spread,” Safehold’s Doherty said.

As the benefits to a project’s capital stack become readily apparent, ground leases will gain wider acceptance and be regularly employed as a key element in the real estate industry. Predictions suggest that ground leases will become mainstream within the next five to 10 years, offering a spectrum of investment opportunities for astute players.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

The lifeblood of real estate is debt, and the Federal Reserve has made borrowing a lot more expensive by raising interest rates five full percentage points between March 2022 and July 2023. 

Households owe $12 trillion on their mortgages, and businesses owe $5 trillion in commercial real estate loans. Both sectors are being affected by higher rates and by fallout from COVID. Lately, shares have rallied, but in many cases I find prices attractively low. 

First, consider residential property. It's no surprise that existing home sales are expected to fall 16% this year. What's surprising is that new-home sales have held up well, as have prices, which are up about 4%, on average, over the past year. The economy has continued to perk along despite higher rates, with unemployment near record lows. And the COVID experience gave buyers an incentive to own larger homes, with space for offices and recreation.

After sharp declines at the beginning of the COVID pandemic, homebuilding stocks have rallied. Meritage Homes (MTH, $149) and NVR (NVR, $6,306), which I recommended previously, have since hit all-time highs. My third recommendation, KB Home (KBH, $54), is up 31%. I still like all three as long-term investments, but they are no longer the bargains they were. (Stocks I like are in bold; returns are as of July 31.)

Commercial real estate has been hit by a double whammy: higher interest rates combined with new patterns of work and shopping as a result of COVID. For many businesses with little public contact, a schedule of three days in the office and two at home is becoming the norm. Whether remote work will persist is unknown, but I am a skeptic. Meanwhile, brick-and-mortar retailers are staging an impressive comeback. My guess is that America will continue to revert to the pre-COVID mean. 

Investors and analysts who soured on commercial real estate over the past two years may have gone overboard in their negativity. Vornado Realty (VNO, $22), for one, which owns 20 million square feet of office properties, concentrated mainly in New York, jumped 66% over the past two months. New York has been left for dead many times, but it keeps resurrecting. 

Los Angeles–based Kilroy Realty (KRC, $36), which puts heavy emphasis on being environmentally friendly, rose 34%. Although shares of commercial developers have risen, prices remain far below pre-COVID highs, thus offering good value. Vornado is down two-thirds from its 2020 peak; Boston Properties (BXP, $67) and Kilroy are down more than half. 

Challenges remain in real estate investing

There's no doubt that many of these companies are having problems. In April, Vornado announced it was suspending its dividend through the end of 2023. But it also said it would buy back $200 million in shares. Boston Properties – the largest publicly traded developer, owner and manager of U.S. workspace – has been suffering lower earnings but is maintaining its payout, for a yield of 5.9%.

Vacancy rates are high nationally – an average of 16.1%, compared with 11.5% three years ago. But there are haves and have-nots. A powerful trend is that large tenants are moving from less-attractive buildings to newer, Class A properties when their leases are up. Beneficiaries are real estate companies with better office space or access to the capital needed for major renovations or new construction. A good example is Atlanta-based Cousins Properties (CUZ, $24), which owns mostly Class A buildings in Sun Belt cities and has a dividend yield of 5.3%. Shares are up more than 20% in the past two months but remain far below their pre-COVID high. 

The bigger, more stable firms have another advantage. Nearly all income-producing real estate companies trade as real estate investment trusts (REITs). By law, REITs have to pay out at least 90% of their earnings (most pay 100%) to shareholders in the form of dividends. Because REITs retain only a tiny proportion of their earnings, they need to raise debt or equity to grow – a problem during uncertain times. (Also note that REITs don't pay dividends nearly as consistently as conventional corporations do.) 

Retail REITs create opportunities in real estate investing

Retail REITs, which lease property to retailers, have managed higher interest rates and changing shopping habits with varying success. Simon Property Group (SPG), the largest in the sector, with more than 232 properties (mainly malls) in the U.S. and Europe, recently took a big hit when its quarterly funds from operations (a metric similar to earnings for a conventional business) failed to meet expectations. Simon is down by about half from its 2016 high, and I would stay away. 

By contrast, Tanger Factory Outlet Centers (SKT, $23), whose shares have more than quadrupled since 2020, may be the future of brick-and-mortar retailing. The company owns or manages 36 open-air shopping centers, featuring brand-name stores selling goods at a discount. Tanger's FFO per share for the quarter ending June 30 was 50% higher than the same period a year earlier. 

I especially like REITs such as Tanger that have niches that provide some protection during downturns. Another example is Alexandria Real Estate Equities (ARE, $126), which leases Class A space to life-sciences and advanced-technology companies, mainly in innovation centers including greater Boston, the San Francisco area, and the Research Triangle area of North Carolina. The REIT has a strong financial base, but it has been caught in the same undertow as other real estate stocks – unfairly, I believe. Shares, which yield 4.1%, are down by more than 40% since December 2021. 

Also consider Host Hotels & Resorts (HST, $18), the largest lodging REIT. Host owns 95 properties and partners with top brands, such as Four Seasons and Ritz-Carlton. High-end hotels have staged a strong recovery as COVID has subsided, but Host shares have been largely flat. I also like CubeSmart (CUBE, $43), one of the three largest owners of self-storage properties. The company, which yields 4.6%, is in a business that benefits from its customers' willingness to endure regular rate increases, thanks to inertia and the unappetizing prospect of moving their belongings elsewhere. 

Finally, a word about two of my longtime favorites that own vast stretches of land: St. Joe (JOE, $63), in northwest Florida, and Tejon Ranch (TRC, $18), in the high desert of California. St. Joe has been a much better performer, quadrupling over the past five years, but Tejon, owner of some 270,000 acres only an hour north of Los Angeles, has substantial promise. 

This is a delicate time for real estate investing. There are risks. Interest rates seem to have leveled off, but they could still rise, and the economy could falter. Some companies, especially in the commercial sector, will probably fail. But overall, share prices are depressed, many of the stocks offer good income opportunities, and the sector provides a hedge against inflation – a good combination. 

James K. Glassman chairs Glassman Advisory, a public-affairs consulting firm. He does not write about his clients. His most recent book is Safety Net: The Strategy for De-Risking Your Investments in a Time of Turbulence. Of the stocks mentioned here he owns NVR. You can contact him at JKGlassman@gmail.com.

Note: This item first appeared in Kiplinger's Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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When most people think about investing, their mind goes to the most common types of investments, like stocks or bonds, or their investment accounts, like their 401(k) or traditional or Roth IRA. 

However, there is a wide array of investment options that can help you diversify your holdings so you are better prepared in the event of a major market meltdown. Essentially, alternative investments are supplements to traditional long-only positions in stocks, bonds and cash.

Who can invest in alternative assets?

Before diving into the types of alternative assets, it's important to know who is qualified to invest in these asset classes. They're considered alternatives because they aren't included in any of the asset classes that would be considered conventional, which are stocks, bonds and cash. These alternative assets are more complex and may be riskier than conventional ones because they usually aren't registered with regulators. 

As a result, most alternative investments are open only to accredited investors. Accredited investors are those who have a net worth of over $1 million, excluding their primary residence, or earned income of more than $200,000 (or $300,000 for married couples) in each of the last two calendar years. 

Financial professionals can also qualify as accredited investors without satisfying one of those two requirements, but until just recently, they must have had a Series 7, 65, or 82 license to do so. Recently, the House of Representatives passed a new bill that allows people with "professional knowledge through educational or professional experience" to qualify as accredited investors without holding any of those licenses. 

The same day, the House also passed a new bill updating the official definition of an accredited investor. This bill gave the Securities and Exchange Commission discretion to decide which credentials are needed to be considered accredited. It also requires an SEC review every five years with amendments as needed. 

What are the different types of alternative investments?

Broadly speaking, most alternative investments can be separated into two groups: public and private.

Public alternative investments definition

Public investments are those that report their holdings publicly. For example, hedge funds may be considered public investments because they must abide by certain reporting regulations with the SEC. In a hedge fund, your investment is pooled together with others' to be managed by a professional portfolio manager who uses many tools, including some more complex and high-risk methods, with the goal of earning above-average returns. 

Hedge funds are considered public because they must file quarterly reports on their holdings, especially those in publicly traded stocks. Most hedge funds also send monthly or quarterly letters to their investors to share details on their views of the markets and sometimes additional details on their holdings, like what they think about the companies they invest in. 

Hedge funds use an array of strategies to achieve risk-adjusted returns for their investors. Long/short equity funds often get most of the attention. Other strategies include global macro, commodities, risk arbitrage, event-driven, fixed-income arbitrage, relative value, and distressed securities. Today, multi-strategy and multi-manager firms are becoming particularly popular, as are hybrid funds that combine a traditional hedge fund structure with that of a private equity firm.

In some cases, exchange-traded funds (ETFs) might be considered public alternatives because they list their holdings publicly and are traded on exchanges like stocks. This is particularly true of ETFs that utilize structures similar to those of hedge funds, aiming for similar risk-adjusted returns.

Private alternative investments definition

Private alternatives include private equity (PE), which includes venture capital (VC), private credit, and infrastructure. PE and VC are similar to hedge funds in that they buy pieces of businesses, but they are privately held businesses rather than publicly traded ones. 

Private equity and venture capital have become exceedingly popular in recent years because these funds have generated significantly better returns at a time when generating alpha, or excess returns on top of what a benchmark has earned, in the publicly traded markets has been extremely difficult.  

Other types of alternative investments

Finally, some alternative investments aren't really public or private. These include commodities like gold, silver, grains, or oil, real estate, and cryptocurrencies. Non-accredited investors can invest in some of these other asset classes, like cryptocurrencies and real estate. Moving out to the far fringes of alternatives, some other options include art and collectibles, wine, farmland, and peer-to-peer lending.

In some cases, investors can invest in a fund that covers multiple individual assets within one of these other classes. For example, a growing number of crypto funds are providing easier access to multiple cryptocurrencies in one fund for investors who don't want to learn to navigate crypto exchanges. Real estate funds can also bundle multiple properties into one fund. 

However, such funds often require investors to be accredited to invest in them.

The pros and cons of alternative investments

Like anything, there are pros and cons of investing in alternatives. On one hand, they provide diversification for your portfolio and the potential to generate returns or alpha in one area of the market when other areas are falling. On the other hand, alternatives are more complex than conventional assets and usually require investors to be accredited. 

Investors are always advised to consult with an adviser and do their due diligence before investing in anything.

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With recession signals flashing, inflation surging and interest rates rising, many Americans are focused on how to protect their investments from major market losses and help provide predictable retirement income.

Given that most investors prefer to make money and not lose it, the first priority of investing should be on playing defense. This means using vehicles to guard against volatility, but it doesn’t mean sitting on the sidelines. It requires being selective and proactive while using strategies that provide stability and steady growth.

Here are two options to provide protection for your money and to generate predictable retirement income.

Indexing

Indexing can be a great way to protect your principal and have upside when the market is positive. Insurance companies offer the ability to “index” your investment and retirement portfolio. Typically, the way it works is you earn interest based on the upside performance of a stock market index. In a year when the stock market is positive, you have the opportunity to earn interest that year. If the stock market is negative, you don’t earn interest that year, but you also don’t lose anything. Your principal is protected against stock market losses.

There are a few ways you can earn interest inside of indexing contracts. The first is through a cap-rate strategy. The cap rate can vary between insurance companies, but some of the best cap rates can be as high as 7% or more.

Let’s assume you have a cap rate of 7%, and the S&P 500 is up 10% for the policy year. In a year like this, your account would be credited 7% interest. You earn interest based on the upside market performance, up to the specified cap.

In a really good year, where the S&P 500 is up 30%, you are still credited up to the cap of 7%. The good news is if the S&P 500 took a big loss and was down 30% for the year, your account would stay flat for the policy year, and your principal would be protected from market losses.

The second way you can earn interest is through a participation-rate strategy. Let’s assume that the participation rate is 50%. If the stock market index is up, you earn 50% of the market return during the policy year. For example, if the S&P 500 is up 10% over the policy year, you are credited 5% interest. If the market is up 30%, you are credited 15% interest. If the S&P 500 is negative 30% for the year, your account would stay flat, and your principal would still be protected from stock market losses.

Indexing can provide two things to investors — principal protection when the market is volatile and upside potential when the market is up.

Real estate investment trust (REIT) preferred stock

A real estate investment trust is a company that owns, operates or finances income-generating real estate. REITs, which are modeled after mutual funds, pool the capital of numerous investors, which makes it possible for individual investors to earn dividends from real estate investments without having to buy, manage or finance any properties themselves.

REIT preferred stock is a type of hybrid security with both equity- and bond-like characteristics. Dividends paid on REIT preferred stocks are often considerably higher than the dividends paid on REIT common stock. With inflation being so high, that’s a key consideration for investors today. While REIT preferred shareholders have no voting rights, they can often benefit from investing when issues are trading at discounts to par.

REIT preferred stock is generally callable between two and five years from the date of issuance, at which point management reserves the right to redeem the shares at par. This two-year non-call period provides the potential for income and capital appreciation.

One of the overlooked benefits of owning preferred stock is the option to purchase “direct issuance” preferred shares. These shares do not trade on the stock market exchange, so they do not experience the market volatility typically associated with common stock or traditional preferred stock offerings. These preferred stocks can be a great way to generate consistent, steady dividends of 6% to 8% per year without the ups and downs of the stock market.

These times are indeed challenging for our economy, and knowing how to adjust your strategies to more of a defensive stance is key to not losing ground.

Dan Dunkin contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

A likely peak in inflation, along with interest rates that are thereby also at or near their apex, stands to revitalize the long-running global search for high yields. 

That should mean more demand for high-yielding credit securities, which include business development companies, or BDCs (typically high-rate lenders to small or midsize firms, with similar tax advantages to those of real estate investment trusts), nonbank lenders, and a few financial REITs. If 5% is the new 1% in the broad bond market, then it is not far-fetched to proclaim 8% the new 5% for these securities. 

Although some investments priced to yield 8% are unappealing if you swallow all the economic gloom, the majority of these publicly traded lenders are having no trouble disbursing interest and dividends to their investors in full and on time. And lending at higher interest rates helps these firms build up their underlying asset values. 

Until and unless the economy falls apart, that will continue. Even in a struggling economy, your investment income should be okay. 

BDCs are mostly reliable for high yields 

According to the statistical wizards at Closed-End Fund Advisors, in the fourth quarter of 2022, 100% – 50 out of 50 – publicly traded BDCs saw their net asset values rise. That, in turn, influences their share prices, which are widely up 5% to 15% so far this year and more generally up since October, yet still trade well below their NAV. And that is in addition to dividend yields in the 8%-to-10% range. 

The primary assets are well-secured senior loans and first liens on a smorgasbord of midsize businesses and their properties, ranging from carwash chains to software developers to military contractors to construction firms. BDCs usually tell you who owes them; for example, Carlyle Secured Lending lists 141 customers. A few of those are other funds, but the bulk are consumer and industrial businesses. 

There is a trust-me aspect, because you cannot know if one or more of these businesses might struggle under its 10% floating-rate debt to Carlyle or whomever else, but the reliability record is encouraging. 

The 10-year annualized total return for all BDCs was just over 9.3% in late January; investment-grade corporate bonds were at nearly 3% and regular junk bonds were at about 4%. That provides a cushion if the sector does experience an uptick in defaults and bankruptcies, though there is little sign of this for now. 

The VanEck BDC Income ETF (BIZD) is an easy way to participate. Based on its latest quarterly distribution, the exchange-traded fund yields 11%.

Ares Capital (ARCC) is the largest BDC and is often described as the one with the highest portfolio quality. At a late-January price of $19.62, it yields 9.8%. Ares just raised its quarterly dividend by 12%. 

Turning to other types of lenders, I've long followed an unusual firm called Ready Capital (RC), which is organized as a REIT for tax reasons but better described as a non-bank small business lender. It lends to buyers and renovators of small apartment complexes and extends small-business credit that is 75% guaranteed by the federal Small Business Administration. Many of its credits are short-term acquisition and bridge loans that come off its books once the borrower finds permanent bank financing, which reduces the chance of a default. 

From an investor's standpoint, RC covers its dividends, trades in a narrow price range and suffered relatively little during the early 2020 COVID crash. At a recent price of $12.96, RC trades well below its reported net asset value and yields 12.3%. 

High yields create a calculated risk for investors 

I am aware that high-rate lending can be dangerous. Misadventures and misjudgments by General Electric's (GE) infamous capital unit caused great pain for GE and its shareholders, eventually forcing a restructuring. 

But companies like Ares and Ready Capital borrow at low or moderate fixed rates and have the market power to exact wide net interest spreads from their customers. They have protected their turf from the likes of GE, Goldman Sachs (GS) and Citigroup (C) and get good marks from analysts who run worst-case loan-loss scenarios. 

Real estate investment trusts (REITs) typically come to mind when considering the most yield-friendly asset class. According to NAREIT data, REIT dividends averaged approximately 3.4% in August, or more than twice the yield of the S&P 500.

And it's these generous yields that make REIT dividends especially attractive to income investors – especially during times of high inflation. While recent releases of the consumer price index (CPI) showed moderating inflation, it will take awhile to bring prices down – creating challenges for those living on a fixed income, who have few options available for offsetting steadily rising costs.

But one option they have is to target REIT dividends. In addition to generous yields, REITs have a built-in cushion to hedge against inflation and limit downside risk. REITs tend to have embedded escalators in their leases that cause rents to rise annually. And many firms will link rent increases with the CPI, making REITs ideal investments during times of higher inflation.

While investors will often seek out the best REITs to buy based on their rich yields, they may often overlook a firm's ability to deliver exceptional dividend growth. BCA Research earlier this year forecast REIT dividends rising by 10%, on average, in 2022, versus 7.1% for the broader S&P 500.

Here are 12 REITs that have the fastest-growing dividends. All of the companies featured here have been reliably raising payouts in recent years and boast five-year average annual dividend growth of at least 8.8%. What's more, these REIT dividends are well-positioned for continued growth thanks to the companies' solid long-term fundamentals.

Data is as of Sept. 7. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price. Stocks are listed in reverse order of five-year average annual dividend growth.

• Market value: $2.1 billion
• Five-year average annual dividend growth: 8.8%
• Dividend yield: 5.2%

CareTrust REIT (CTRE, $21.27) acquires and leases senior housing and healthcare properties to many of the country's leading regional and national healthcare chain operators. The company's current portfolio consists of 198 properties totaling 21,537 beds distributed across 21 states, with major concentrations in Texas (23%) and California (28%). These assets, which consist primarily of skilled nursing facilities with some multi-service campuses and senior housing as well, are leased to 18 different healthcare chain operators.

Demographic trends support the REIT's growth expectations. The demand for skilled nursing facilities is forecast to increase steadily over the next decade due to an aging U.S. population.

CareTrust has 32 facilities representing roughly 10% of contracted rents that it plans to reposition or sell as part of a 2022 plan to optimize its portfolio. Three underperforming senior housing facilities are being converted into residential addiction recovery centers, marking the company's initial foray into the lucrative behavioral health facility market.

CTRE also has an active acquisition pipeline, and so far this year has acquired skilled nursing facilities in Texas and Illinois, as well as an 18-property portfolio in the Mid-Atlantic. In each case, the new facilities have already been added to existing master leases with current CareTrust tenants.

The REIT collected 94% of contracted rents during the June quarter and experienced rising occupancy rates in both its skilled nursing and senior housing segments. FFO per share (funds from operations, a key REIT metric) was flat year-over-year at 36 cents during the June quarter, but amply covered CTRE's 27.5 cents per-share quarterly dividend.

CareTrust has a great track record for REIT dividends, averaging nearly 9% annual increases over the past five years. CTRE even increased dividends early on in the pandemic when many other healthcare REITs were cutting payments. A solid balance sheet shows no debt maturities before 2024 and a conservative ratio of net debt at roughly 4.3 times EBITDA (earnings before interest, taxes, depreciation and amortization).

"Management has started to execute on the portfolio repositioning that was announced in February," says Stifel analyst Stephen Manaker. "We continue to believe this approach makes sense given the REIT can easily sell non-core properties into a very liquid sales market and recycle the capital." The analyst has a Buy rating on CTRE due to the real estate stock's "attractive" valuation. Shares are currently trading at less than 14 times forward adjusted FFO, which is an 18% discount to the REIT sector.

• Market value: $75.2 billion
• Five-year average annual dividend growth: 9.0%
• Dividend yield: 3.4%

Crown Castle (CCI, $173.68) is the country's largest provider of shared communications infrastructure. The REIT owns and/or operates a network of more than 40,000 cell towers, approximately 115,000 small cell nodes (used to bolster capacity in areas where data demand is greatest) and 85,000 route miles of fiber. The REIT has a presence in every major U.S. market.

At present, Crown Castle is enjoying long-term tailwinds fueled by steady growth in mobile data demand as well as rent escalators embedded in its long-term contracts. Current contracts have a weighted average of seven years remaining on lease payments totaling $42 billion. Wireless carriers like the REIT's mix of towers, small cell nodes and fiber, which enables coverage and capacity expansion to support denser networks and relieves congestion.

CCI's cell tower segment generated 6% organic growth during the first six months of 2022 as a result of clients investing in the first phase of 5G buildouts. The REIT plans to double its rate of small cell deployments to approximately 10,000 next year.

Site rental revenues increased 10% during the June quarter, adjusted EBITDA jumped 13% and adjusted FFO per share improved 5%. These solid results caused Crown Castle to hike its full-year 2022 outlook and the REIT is currently guiding for 14% adjusted EBITDA gains and 6% adjusted FFO per share growth.

Investors looking for consistent REIT dividends will find a winner with CCI. Over the past five years, Crown Castle has grown its dividend 9% annually, on average. The latest dividend increase was 10.5% last October. The REIT is committed to delivering at least 7% to 8% dividend growth per year and room to hike its payment is enabled by a 77% payout from FFO. Dividend safety is also enhanced by the REIT's investment-grade balance sheet.

Jefferies analyst Jonathon Peterson thinks that data center REITs like Crown Castle are better positioned than others to offset inflation due to their short-term leases and ability to pass through rising costs via rent increases. He upgraded CCI shares to Buy in June.

• Market value: $58.9 billion
• Five-year average annual dividend growth: 9.5%
• Dividend yield: 1.9%

Equinix (EQIX, $647.20) is a global digital REIT that operates 248 data centers across 31 countries and serves over 10,000 customers. Following an intense round of buyouts by equity firms last year, Equinix and rival Digital Realty Trust (DLR) are the market's only remaining pure play digital REITs.

EQIX serves over 3,000 cloud and IT service provider customers, including leading hyperscale cloud providers like Alphabet (GOOGL), Microsoft (MSFT), Zoom Video Communications (ZM) and Oracle (ORCL). Approximately 95% of the REIT's revenues are recurring and 90% of its bookings are from existing customers, providing a highly predictable income stream. The company has been adding approximately 200-300 new customers per quarter and has held its churn rate to around 2%.

The company continues to expand its global footprint and recently made its first entry into the African market via the $320-million acquisition of MainOne. This follows last quarter's $750-million purchase of four Entel data centers in South America. The REIT has 49 development projects underway worldwide, including additional data centers opening in Milan, Frankfort, London, Mexico City, Sydney and Tokyo.

Equinix's growth initiatives are supported by a BBB+ rated balance sheet showing $5.8 billion of available liquidity. And so far, so good. The REIT has recorded 78 consecutive quarters of revenue growth, which is the longest track record of any S&P 500 company.

The company's track record for dividend growth is building. The REIT has delivered six consecutive years of dividend hikees, including nearly 10% annual increases, on average, over five years. Plus, its payout from FFO is in the modest 60% range.

Oppenheimer analyst Timothy Horan upgraded EQIX shares to Outperform (Buy) in July, calling this REIT the primary on-ramp for the cloud. He thinks Equinix possesses the critical infrastructure and competitive moats necessary for recession resistance and maximum pricing power. Investors seeking out REIT dividends will definitely want to keep EQIX on their radar.

• Market value: $10.7 billion
• Five-year average annual dividend growth: 9.8%
• Dividend yield: 3.6%

CubeSmart (CUBE, $47.35) is among the top three self- storage REITs in the U.S., owning and/or managing nearly 1,300 properties. This REIT expanded its portfolio in high-growth Western markets (Southern California, Phoenix, Houston and Las Vegas) last December via the $1.7-billion acquisition of Storage West, which owned 59 facilities.

CUBE put in a strong showing in the June quarter, boasting a same-store occupancy rate of 95% and generating 19% same-store net operating income gains. The REIT's 12.7% rental revenue growth reflects acquisitions, new development and new stores added to the company's profitable third-party management platform. What's more, a 24% year-over-year jump in adjusted FFO per share prompted CubeSmart to raise its full-year FFO per share outlook.

Income investors eyeing REIT dividends will want to give CubeSmart a closer look. The company has an 11-year track record of dividend growth, including 10% average annual hikes over five years. And late last year, CUBE rewarded investors with a 26% dividend hike. Payout from FFO appears sustainable at 70% and the REIT boasts ample liquidity and an investment-grade balance sheet.

In May, Raymond James analyst Jonathon Hughes lifted his rating on CUBE to Strong Buy, due to an attractive risk-reward setup, as well as the recession-resistant nature of its business. And in June, BofA Securities analyst Jeffrey Spector upgraded CUBE to Buy, citing improving economic data for metropolitan New York, where CubeSmart is the storage space market leader.

• Market value: $93.8 billion
• Five-year average annual dividend growth: 10.5%
• Dividend yield: 2.5%

Logistics REIT Prologis (PLD, $126.63) is merging with rival Duke Realty (DRE) in a $26-billion all-stock transaction. DRE will bring Prologis a portfolio of roughly 5,300 properties comprising 153 million square feet of leasing space, while also building out PLD's presence in a variety of key markets, including Southern California, Dallas and Atlanta. Other benefits of the merger include anticipated annual synergies of $375 million to $400 million and an anticipated boost to annual FFO per share of 20 cents to 25 cents.

At present, Prologis owns 4,732 facilities and has investments, joint ventures and development projects expected to total approximately 1.0 billion square feet of leasing space across 19 countries. Prologis is already the world's largest logistics REIT and serves over 5,800 tenants including e-commerce giant Amazon.com (AMZN) and shipping stalwarts UPS (UPS) and FedEx (FDX).

Demand in the U.S. warehouse space is strong, and, at the current rate of leasing, all available space is anticipated to dry up within the next 16 months. The supply-demand imbalance is reflected in Prologis' high 97.4% occupancy rate and whopping 45.6% rent growth from new and renewed leases during the June quarter.

Roughly 16% of the REIT's leases expire in the second half of 2022, which should fuel additional rent gains this year. Also supporting PLD's future growth is $1.6 billion of active development projects underway and 10,700 acres of land available to the company for future development.

Prologis also generates recurring revenues from managed third-party facilities, and these have been rising at a 23% average annual rate since 2018. They currently comprise approximately 12% of revenues.

Over the last five years, Prologis has generated average annual growth of 11% core FFO per share and 12% in dividends. Core FFO per share rose 10% in the June quarter, and Prologis raised its outlook for full-year FFO to a range of $5.14 per share to $5.18 per share, up 24% at the midpoint of guidance.

PLD is one of the most reliable names for REIT dividends, too. Payments have risen eight years in a row and payout is modest at 65% of FFO. The latest dividend increase was 25.6% in February.

A terrific balance sheet supports the company's ability to acquire and/or develop properties. Prologis has $6.8 billion of available liquidity, credit ratings of A3 and A from Moody's and Standard & Poor's, respectively, and low leverage showing debt at just 3.9 times adjusted EBITDA.

Prologis was one of only two real estate companies touted by Goldman Sachs strategist David Kostin in June as among the most stable stocks in the S&P 500. He anticipates PLD will outperform if the direction of the U.S. economy remains uncertain.

• Market value: $14.2 billion
• Five-year average annual dividend growth: 11.1%
• Dividend yield: 2.3%

Equity Lifestyle Properties (ELS, $72.80) is a manufactured housing REIT that also owns recreational vehicle (RV) resorts, campgrounds and marinas. The REIT's portfolio includes developed sites under long-term leases to owners of manufactured housing, RVs and recreational boats. At present, Equity Lifestyle owns 446 properties spread across 35 U.S. states and Canada consisting of nearly 170,000 manufactured housing sites. These properties are located in popular retirement and vacation destinations.

Strong demand for manufactured housing sites, fueled by retiring baby boomers, has enabled ELS to maintain 98%+ occupancy rates and 4.2% annual core rent growth over five years.

This REIT's ability to thrive across all parts of a real estate cycle is evidenced by its 15-year track record that shows 9% annual FFO per share gains and 22% yearly dividend growth through 2021.

Annual dividend growth over five years has ranged around 11%, while payout from adjusted FFO is relatively modest at 68%.

This REIT's dividends isn't the only thing seeing impressive growth. Equity Lifestyle's normalized FFO per share rose 9.6% during the first six months of 2022, and the company is guiding for normalized FFO per share ranging from $2.68-$2.78 this year, up 8% at the midpoint.

Bulls like ELS for its strong business model, high dividend growth and healthy balance sheet. The stock boasts Buy or Strong Buy ratings by seven of the 12 Wall Street analysts following it.

• Market value: $2.8 billion
• Five-year average annual dividend growth: 11.3%
• Dividend yield: 2.9%

NexPoint Residential Trust (NXRT, $53.32) owns and acquires multifamily properties primarily in the Sunbelt states. At present, the REIT owns 41 apartment communities together comprising 15,387 units that are spread across core markets, including Las Vegas, Atlanta, Nashville, Orlando and Raleigh-Durham.

The migration of working-class Americans to the Sunbelt as a means of fleeing higher rents is supercharging demand for apartments in these key areas. In addition, many large corporations are relocating their headquarters to tax-friendly Sunbelt states, bringing thousands of workers with them.

As a result of rising demand, NexPoint is able to capture big increases in rent ranging from 13.8% in Nashville to 17.5% in Phoenix, while maintaining 94% to 95% occupancy rates across all of its markets. Overall, portfolio occupancy during the June quarter was 94.2%

In addition to macroeconomic factors driving rental income gains, NXRT has redevelopment projects underway impacting approximately 4,900 apartment units. The return on investment from these projects, which include full interior upgrades and smart home technology, is expected to range from 20% to 63%.

The REIT's core FFO rose 41% during the June quarter and 39.8% during the first six months of 2022. At the midpoint of guidance, NexPoint is targeting 15.8% same-store net operating income growth, $225 million of acquisitions and 24% growth in FFO per share for all of 2022.

NXRT's preference for floating-rate versus fixed-rate debt has spooked investors already worried about rising interest rates. The real estate stock is down more than 37% for the year-to-date to trade at 18 times forward FFO. This is an unusually low valuation for this fast-growing Sunbelt REIT.

However, the selloff allows investors seeking out REIT dividends to get one of the best names for growth at a discount. NexPoint has increased dividends six years in a row, averaging an 11% annual hike over the past five years. The last dividend increase was 11.4% in November. Modest payout at only 54% of FFO leaves plenty of room for another double-digit dividend hike down the road.

Credit Suisse named NexPoint one of its top five REIT picks in June. NXRT shares enjoy Buy or Strong Buy ratings from five of the company's eight Wall Street analysts.

• Market value: $28.8 billion
• Five-year average annual dividend growth: 12.0%
• Dividend yield: 3.0%

Extra Space Storage (EXR, $205.12) is a leading self-storage REIT that manages a portfolio of 2,130 properties and 164 million square feet of leasing space across 41 U.S. states. It is the second largest self-storage REIT in the U.S., behind only industry leader Public Storage (PSA), which is twice as large. In addition to 995 wholly-owned facilities, Extra Space Storage has 288 sites owned through joint ventures and 847 properties it manages for third parties.

The U.S. self-storage sector is currently benefiting from robust occupancy levels, significant pricing power and diminishing new supply. These trends are reflected in Extra Space Storage's rising occupancy rate and 22% same-store revenue growth in the first half of 2022.

Over that same six-month time period, EXR acquired 41 new sites, added 77 stores to its third-party management platform, and boosted core FFO per share by 31.8%. The company is guiding for 18.5%-21.5% same-store net operating income growth this year and core FFO per share of $8.30-$8.50, up 21.5% at the midpoint of guidance.

Compared to other self-storage REITs, Extra Space Storage is a best-in-class operator. This is based on its five-year record of 6.1% annual revenue growth and 7.5% yearly net operating income gains. Plus, since 2011, EXR has seen sector-leading core FFO per-share growth of 600%.

Investors seeking out REIT dividends will definitely want to give EXR a closer look. The company has increased dividends 11 years in a row, averaging 12% annual gains over five years. EXR most recently hiked its dividend in February, by 20%. The dividend is likely secure, with payout at a solid 70% of FFO. What's more, the REIT boasts an improving balance sheet, with net debt that has recently declined to only 4.5 times EBITDA.

EXR stock had a blazing run in 2021, with the share price nearly doubling. However, the REIT has stalled a bit in 2022, down roughly 10% for the year-to-date.

Still, plenty of analysts are upbeat toward the REIT. Extra Space Storage has earned Buy or Strong Buy ratings from half of the 14 analysts covering the stock.

• Market value: $4.6 billion
• Five-year average annual dividend growth: 12.7%
• Dividend yield: 2.6%

Terreno Realty (TRNO, $61.08) is an industrial REIT that owns 249 distribution facilities encompassing 15.1 million square feet of space. TRNO operates in six major coastal U.S. markets, including Seattle, Washington D.C. and Miami. These markets are important because of their population density, strategic position on key shipping routes and physical/regulatory barriers to new supply.

This REIT's same-store portfolio occupancy has consistently exceeded 98%. It's likely to remain high, given that 35% of its portfolio is in markets where industrial supply is shrinking and 47% is in markets lacking net new supply. Scarce supply also provides Terreno with exceptional rent growth opportunities as expiring leases are renewed.

Indicative of its exceptional bargaining power, the REIT increased cash rents on new and renewed leases by nearly 43% during the first six months of 2022. Terreno enjoyed 11.4% same-store net operating income growth during the first half of this year and increased FFO per share by 14% during the June quarter.

Fueling this growth is TRNO's expansion strategy, which focuses on selective infilling of its six coastal markets via acquisitions, redevelopment and leasing. In the first half of 2022, the REIT closed $316 million of acquisitions, with another $51.3 million of properties under contract.

The company's fundamental strength is helping to reward investors seeking out REIT dividends. Terreno issued a nearly 18% dividend hike in August and has averaged double-digit annual dividend growth over the last five and 10-year periods. And it has done this while maintaining payout from FFO in the 75% range.

TRNO is expensive, trading at a multiple of 31 times forward FFO. However, bulls think this rich valuation is warranted given the REIT's unique footprint, high barriers to entry and robust dividend growth. TRNO shares are ranked Buy or Strong Buy by six of 11 covering Wall Street analysts.

• Market value: $11.2 billion
• Five-year average annual dividend growth: 13.5%
• Dividend yield: 2.0%

Rexford Industrial Realty (REXR, $63.44) focuses exclusively on industrial properties in Southern California. The REIT owns 335 properties encompassing 40.8 million square feet of leasing space and roughly 1,600 tenants.

The company's Southern California market is valued at $37.2 billion, or nearly five times the value of the next five largest U.S. markets combined. This area is characterized by limited new supply, rising demand and rent growth that has consistently exceeded national averages.

Over the past five years, Rexford's Southern California footprint has helped the REIT achieve average annual gains of 31% in net operating income, 15% in FFO per share and 18% in dividend hikes.

REXR extended its record of high growth during this year's June quarter, delivering a 99.1% occupancy rate, 25.6% core FFO per share gains and adding 18 new properties to the portfolio[. Rexford Industrial also raised its full-year FFO per-share guidance, currently targeting 17% growth at the midpoint.

The REIT plans to grow by infilling its existing markets and currently has nearly 240 million square feet of space and 2,000 properties in its acquisition pipeline. Rexford also says it has the ability to create another $1.0 billion of value through 2024 via its repositioning and redevelopment pipeline.

An investment-grade balance sheet showing roughly $1.5 billion of liquidity gives this REIT plenty of dry powder for acquisitions and development. At the same time, Rexford's rising dividend remains well-covered, with payout ranging around just 57% of FFO. The REIT's latest dividend increase was a 31.3% hike in February. All of this bodes well for investors looking for the best REIT dividends.

While REXR is trading at a somewhat expensive 33 times forward FFO, most analysts think its strong growth prospects warrant a richer valuation. The stock enjoys Buy or Strong Buy ratings eight of its nine Wall Street analysts.

• Market value: $2.5 billion
• Five-year average annual dividend growth: 16.8%
• Dividend yield: 10.7%

Mortgage lender Arbor Realty Trust (ABR, $14.80) makes loans on a wide variety of property types, including multifamily, office, industrial and retail. The REIT's portfolio consists mainly of small balance bridge loans, averaging $7 million in size.

Bridge loans are loans made to transition or upgrade a property. Over 90% of the REIT's bridge loans are tied to multifamily properties, which are considered a less risky property type. The REIT's portfolio is also well-diversified geographically, with the largest concentrations being in Texas (20%), Florida (14%) and Georgia (8%). These Southern states are exhibiting healthy economic growth and net migration that is driving high demand for housing.

In addition to lending, Arbor Realty Trust manages a multibillion-dollar loan servicing portfolio that provides healthy recurring revenues. The REIT is a leading Fannie Mae lender and Freddie Mac loan seller/servicer. ABR's $27 billion servicing portfolio generates $121 million of income annually and the portfolio has nine years of remaining life.

Over the past five years, the REIT has increased loan originations and the value of its servicing portfolio at compound annual growth rates of 11% and 15%, respectively.

And this strength was seen in the June quarter, too, with Arbor Realty's loan portfolio growing 6% over the three-month period to exceed $15 billion. The company also originated $1.27 billion of loans and saw its distributable earnings rise 16% to 52 cents per share.

What's more, shareholders were rewarded with the company's ninth consecutive quarterly dividend hike. This is just more of the same for one of the best names for REIT dividends, with payouts growing 30% over nine quarters and 17%, on average, annually over five years. Plus, the dividend appears safe with payout at just 75% of distributable earnings, and its rich dividend yield is three times the average peer levels.

Like other mortgage REITs, Arbor Realty is highly leveraged, but its focus on smaller loans and multifamily properties helps mitigate risk. Additional operations in loan originations and servicing also enhance the stability of its cash flows. Plus, ABR showed its resilience during the pandemic when, unlike other mortgage REITs, it posted record profits in 2019, 2020 and 2021.

Recession fears have caused shares of mortgage REITs to decline in 2022, with ABR down about 20% for the year-to-date. However, Arbor Realty now appears bargain-priced, trading at a low 7.7 times forward earnings – a 21.5% discount to industry peers.

• Market value: $120.8 billion
• Five-year average annual dividend growth: 18.3%
• Dividend yield: 2.3%

Income investors focused on REIT dividends should find much to admire with American Tower (AMT, $259.50). This leading cell tower REIT has increased its dividend at an average annual rate of roughly 20% since 2012. Dividend growth over the last 12 months has been 14%.

Steadily rising mobile data traffic is creating demand for more cell towers worldwide. And American Tower, with a global portfolio made up of approximately 220,000 communication sites across the U.S., Europe, India and Latin America, has steadily increased profits by adding new tenants to its existing cell towers. The REIT's return on investment rises from 3% at one tenant per cell tower to 13% with two tenants and 24% with three tenants.

American Tower supplements organic growth from lease-ups with acquisitions. Last November, the REIT announced the roughly $10-billion acquisition of data center REIT CoreSite. This transaction establishes American Tower as the market leader across multiple classes of communications real estate and a key player in 5G deployment. The CoreSite purchase is also significantly accretive to long-term FFO.

And in July, AMT announced a partnership with investment firm Stonepeak in its U.S. data center business, which consists of 27 data centers in 10 domestic markets and more than 450 networks. Stonepeak invested $2.5 billion to gain a 29% stake in the U.S. data center business and will be a strategic financing partner going forward.

These deals will certainly help boost growth for AMT, but it is already strong on the fundamental front. The company has delivered roughly 14% annual gains in EBITDA and FFO per share since 2011.

During the June quarter, revenues grew 16.3%, adjusted EBITDA gained 13.2% and adjusted FFO per share rose 7.0%. At the mid-point of guidance, the REIT is guiding for 13.8% revenue growth, 10.1% adjusted EBITDA gains and 7.0% adjusted FFO per share improvement in 2022.

The company maintains a strong investment-grade balance sheet, boasts plenty of liquidity and recently reiterated its commitment to at least 12.5% annual dividend growth.

AMT is rated Buy or Strong Buy by 14 of the 19 Wall Street analysts covering the stock. Credit Suisse analyst Tayo Okusanya recently named AMT one of his top five picks in the REIT sector. He sees American Tower benefiting significantly from 5G and hybrid work trends.

COVID-19, inflation and the Federal Reserve have so dominated the financial news that it was easy to miss the run-up in utility and real estate shares.

In the fourth quarter of 2021, real estate investment trusts (REITs) averaged a 17.5% return and utilities averaged 12.9%. The first few days of 2022 were poor, but I remain all-in on the duo, given that the chatter about higher interest rates is unlikely to translate soon into livable terms on savings accounts, CDs, money market funds and new government bonds.

I have doggedly dissed the dated doctrine that demeans REITs and utilities as "bond proxies" whose business models and investor returns depend on low and falling interest rates. I predict that both groups (other than in rare, random cases of mismanagement) will flourish as America absorbs this moderately higher inflation along with strong economic growth.

These are not merely defensive stock sectors. Utilities earn more and pay bigger dividends when they sell extra water and power. They are major landowners and both builders of and investors in renewable-energy projects.

The bulk of property-owning REITs are also developers and acquirers whose appreciating land and building values and rising rents support ever-higher dividends.

In 2021, according to Hoya Capital, 130 publicly traded realty trusts boosted dividends. That is more than 75% of them. It's not unusual to see five-year compound growth rates of 10% for cash flow and dividends.

I urge that all income-focused portfolios maintain core positions in both REITs and utilities, with regular contributions as you see fit. Through Jan. 7, Standard & Poor's real estate index shows an annualized 10-year total return of 12.6%; utilities clocked in at 11.2%. Dividends are 4% of that haul with utilities; 3.5% with real estate.

What Stocks to Buy Now

Within the property REIT sector, 15 of 16 subsectors returned at least 18% in 2021 (lodging was the exception). I advise you to stay with what is working, but with REITs, one year's laggards often become next year's leaders (not always the reverse, though).

Housing and industrial REITs are expensive now. Hold them for their high yields, but do not chase them with fresh cash. Lodging and healthcare REITs should score well in 2022; comeback ideas include Community Health (CHCT, $48) and Omega Healthcare (OHI, $31), and in hotels, Host Hotels and Resorts (HST, $18) and Xenia Hotels and Resorts (XHR, $18). Hotel REITs still pay zero or a pittance in dividends, but the shares are deeply discounted to net asset value, and when profits return, so will their payouts. Remember, retail and office REITs were pronounced dead two years ago but revived.

Utilities are essential businesses. Everyone needs heat and light, and usually there is a local monopoly. Utilities should clean up over the years from electric cars and cheaper electricity generation from wind and solar. They have ready access to inexpensive capital and a friendly administration that wants to help with reconstruction and service quality.

My favorites include American Water Works (AWK, $174), National Grid (NGG, $72) and Xcel Energy (XEL, $69). Or use the Utilities Select Sector SPDR Fund (XLU, $70). I am not a fan of indexing, but consolidation within the industry leaves less scope for active managers to find mispriced investments. The ETF's yield is just shy of 3%.

In the search for rich dividend yields, mortgage REITs (mREITs) are in a class all their own.

These are companies are structured as real estate investment trusts (REITs), but they own interest-bearing assets like mortgages and mortgage-backed securities rather than physical real estate.

One of the biggest reasons to own mortgage REITs is their exceptional yields, currently averaging around 8% to 9%, according to Nareit – the leading global producer on REIT investment research – more than four times the yield available on the S&P 500. These outsized yields are enticing, but investors should approach these stocks with caution and hold them only as one part of a larger, more diversified portfolio.

One reason for this is their sensitivity to changes in interest rates. When interest rates rise, mortgage REIT earnings generally decline. The Federal Reserve is signaling plans for multiple rate hikes in 2022 that could create headwinds for these stocks.

And increasing interest rates hurt mREITs because these businesses borrow money to fund their operations. Their borrowing costs rise with interest rates, but the interest payments they collect from mortgages remain the same, causing profit margins to compress. Some of this risk can be managed with hedging tools, but mortgage REITs can't eliminate interest-rate risk altogether.

Another caveat is that mortgage REITs frequently cut dividends when times are tough. During the height of the COVID-19 pandemic in 2020, 30 of this sector's 40 companies either cut or suspended dividends. On the flip side, dividends were quickly restored in 2021, with 20 mREITs raising dividends.

We searched the mortgage REIT universe for stocks whose dividends appear safe this year.

Read on as we explore five of the best mREITs for 2022. A few of these REITs are reducing interest-rate risk via acquisitions or an unusual lending focus, while others have strong balance sheets or outstanding track records for raising dividends. And all of them offer exceptional yields for investors.

Data is as of Jan. 12. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price. Stocks are listed in order of lowest to highest dividend yield.

• Market value: $4.1 billion
• Dividend yield: 2.9%

Hannon Armstrong Sustainable Infrastructure Capital (HASI, $48.56) is a bit of an oddball for a mortgage REIT in that it specializes in clean energy and infrastructure rather than pure real estate. Specifically, the real estate investment trust invests in wind, solar, storage, energy efficiency and environmental remediation projects – making it not only one of the best mREITs, but also one of the best green energy stocks to own.

Its loan portfolio encompasses 260 projects and is valued at $3.2 billion. In addition to its own loans, Hannon Armstrong manages roughly $8 billion of other assets, mainly for public sector clients.

This mREIT boasts a $3 billion pipeline and is ideally positioned to capture some portion of the spending from the $1.2 trillion infrastructure bill that was passed by Congress in late 2021.

Over the last three years, Hannon Armstrong has generated 7% annual earnings per share (EPS) gains and 1% yearly dividend growth. Over the next three years, HASI is targeting accelerated gains of 7% to 10% yearly earnings per share growth and 3% to 5% in dividend hikes. Future earnings growth should be enhanced by the firm's prudent 1.6 times debt-to-equity ratio.

Hannon Armstrong produced exceptional September-quarter results, showing 45% year-over-year loan portfolio growth and a 14% increase in distributable earnings per share.

Analysts expect earnings of $1.83 per share this year and $1.91 per share next year – more than enough to cover the REIT's $1.40 per share annual dividend.

HASI is well-liked by Wall Street analysts, with five of the six that are tracking the stock calling it a Buy or Strong Buy.

• Market value: $7.7 billion
• Dividend yield: 7.6%

Starwood Property Trust (STWD, $25.44) has a $21 billion loan portfolio, making it the largest mortgage REIT in the U.S. The company is affiliated with Starwood Capital Group, one of the world's biggest private investment firms.

STWD is considered a mortgage real estate investment trust, but it operates more like a hybrid by owning physical properties as well as mortgages and real estate securities. Its portfolio comprises 61% commercial loans, but the REIT also has sizable footholds in residential loans (11%), properties (12%) and infrastructure lending (9%), a relatively new focus for the company.

The mREIT benefits from access to the databases of Starwood Capital Group, which makes over $100 billion in real estate transactions annually and has a portfolio consisting of 96% floating-rate debt. This high percentage of floating-rate debt and unusually short loan durations – averaging just 3.3 years – minimizes Starwood's risk from rising interest rates.

STWD is also one of the nation's largest servicers of commercial mortgage-backed securities (CMBS) loans; sizable, reliable loan servicing fees help mitigate risk if loan credit quality deteriorates.

Starwood Property Trust closed $3.8 billion of new loans during the September quarter and generated distributable earnings of 52 cents per share – up sequentially from June and slightly above analysts' consensus estimate. After the September quarter closed, the mREIT booked a huge $1.1 billion gain on the sale of a 20% stake in an affordable housing real estate portfolio.

The company has made 12 consecutive years of quarterly dividend payments, and unlike many other mortgage REITs, held its ground in 2020 by maintaining an unchanged dividend.

Of the seven Wall Street pros following STWD, one says it's a Strong Buy, five call it a Buy and just one says Hold. Adding fuel to the bullish fire, CNBC analyst Jon Najarian recently tapped Starwood as one of his top stocks to watch, given its impressive 7.6% dividend yield.

• Market value: $2.8 billion
• Dividend yield: 7.7%

Arbor Realty Trust (ABR, $18.70) stands out as one of the best mREITS given its six straight quarters of dividend hikes and a compound annual growth rate (CAGR) of nearly 18% for dividend growth over the past five years.

What's more, Arbor Realty Trust has delivered 10 straight years of dividend growth while maintaining the industry's lowest dividend payout rate.

This mortgage REIT is able to steadily grow dividends thanks to the diversity of its operating platform, which generates income from agency and non-agency loans, physical real estate (including rentals) and servicing fees.

Agency loan originations and the servicing portfolio have grown at a 16% CAGR over five years. And during the first nine months of 2021, Arbor Realty Trust set a new record with balance sheet loan originations, coming in at $7.2 billion – 2.5 times its previous record. Loan volume rose 45% over its previous record to total $13.2 billion over the nine-month period.

While September EPS declined year-over-year due to a reduced contribution from equity affiliates, earnings for the first nine months of the year were up 164% from the year prior to $1.56 per share.

Arbor Realty Trust earns Buy ratings from two of the three Wall Street analysts following the stock, and Zacks Research recently named ABR one of its top income picks for 2022.

Valued at only 10 times forward earnings – which is 15.4% below industry peers – ABR shares appear bargain-priced at the moment.

• Market value: $2.1 billion
• Dividend yield: 8.2%

MFA Financial (MFA, $4.68) just closed an impactful acquisition that reduces its exposure to interest-rate changes and accelerates loan growth. This REIT was already hedging its bets by investing in both agency and non-agency mortgage securities.

Agency securities are guaranteed by the U.S. government and tend to be safer, lower-yielding and more sensitive to interest rates than non-agency securities. By combining these in one portfolio, MFA Financial generates nice returns while reducing the impact of changes in interest rates and prepayments on the portfolio.

Through the July acquisition of Lima One, MFA Financial becomes a major player in business purpose lending (BPL), an attractive niche comprised of fix-and-flip, construction, multi-family and single-family rental loans.

An aging U.S. housing stock is creating demand for real estate renovations and causing BPL to soar. BPL loans are good quality and high-yielding, but difficult to source in the marketplace. With the purchase of Lima One, MFA Financial gains a $1.1 billion BPL loan-servicing portfolio and an established national franchise for originating these types of loans.

Lima One's impact was apparent in MFA Financial's September-quarter results. The REIT originated $2.0 billion of loans, the highest quarterly total on record, and grew its portfolio by $1.5 billion after runoff.

Net interest income increased 15% on a sequential basis, and gains recorded on the Lima One purchase contributed 10 cents to the mREIT's earnings of 28 cents per share. MFA Financial also took advantage of the strong housing market to sell 151 properties, booking a $7.3 million gain on the sale. MFA's book value – the difference between the total value of a company's assets and its outstanding liabilities – rose 4% sequentially to $4.82 per share, a modest 3% premium to its current share price.

Raymond James analyst Stephen Laws upgraded MFA to Outperform from Market Perform – the equivalents of Buy and Hold, respectively – in December. He thinks the Lima One acquisition will accelerate loan growth and reduce the mortgage REIT's borrowing costs.

MFA Financial has a 22-year track record of paying dividends. While payments were reduced in 2020, the REIT recently signaled improving prospects with a 10% dividend hike in late 2021.

• Market value: $1.3 billion
• Dividend yield: 8.6%

Broadmark Realty Capital (BRMK, $9.77) is unusual for its zero-debt balance sheet, robust loan origination volume and sizable monthly dividends. This mortgage REIT provides short to mid-term loans for commercial construction and real estate development that are less interest-rate sensitive. As such, BRMK is a solid play on America's housing boom.

Lending activities focus on states with favorable demographics and lending laws. Plus, 60% of its business comes from repeat customers, ensuring low loan acquisition costs.

Broadmark Realty Capital achieved record loan origination volume of $337 million during the September quarter, roughly twice prior-year levels and up 68% sequentially. The overall portfolio grew to $1.5 billion. Broadmark Realty Capital also originated its first loans in Nevada and Minnesota, with expansion into additional states planned during the December quarter.

Despite rising revenues and distributable EPS, Broadmark Realty's results came in slightly below analyst estimates and its share price declined in reaction. However, this price slip may present an opportunity to pick up one of the best mREITs at a discount. At present, BRMK shares trade at just 12.7 times forward earnings and 1.1 times book value – the latter of which is a 15% discount to industry peers.

The mortgage REIT cut its dividend in 2020, but continued to make monthly payments to shareholders. And in 2021, it raised its dividend 17% in early 2021. While dividend payout currently exceeds 100% of fiscal 2021 earnings, analysts are forecasting a 17% rise in fiscal 2022, which would comfortably cover the current 84 cents per share annual dividend.

Real estate stocks have been on a roll. Over the past 12 months, the MSCI US REIT index gained 30.4%, which beat the 29.3% return of the S&P 500. REITs trade like stocks, but like bonds, are sensitive to interest rate swings, especially over the short term. That has been a boon to real estate securities as the stock market has soared and interest rates have stayed low. (Rates and bond prices tend to move in opposite directions.)

Will rising rates end the good times for REITs? Over the medium to long term, that’s not likely, say David Copp and Brendan Lee, managers of TIAA-CREF Real Estate Securities (symbol TCREX). That’s because rates tend to rise when the economy is doing well, says Copp, and “a strong economy is better for real estate than higher rates are bad, because revenue is growing faster than interest expenses are rising.”

Copp and Lee own a diversified portfolio of REITs and real estate securities, including real estate brokers and developers, homebuilders, property-management companies, and financial firms that make or service mortgage loans. “We’re not focused on the highest dividend payers,” says Lee. Instead, the team homes in on investments “that we think will experience the best growth in underlying cash flow and generate the highest price appreciation.” Top holdings include wireless communications infrastructure company American Tower, and Prologis, a logistics-focused real estate firm and member of the new Kiplinger ESG 20, which includes our favorite environmentally focused stocks.

Copp and Lee aren’t afraid to buy in weak subsectors if the price is right, as their stake in Simon Property Group, the largest owner of shopping malls, illustrates. Over the past year, retail REITs “were priced like people were never going to shop at malls anymore, and that’s simply not the case,” says Lee. Lately, the managers have favored firms benefiting from the economic reopening, es­pecially apartments and regional malls. As those investments gained in recent months, they took some profits and redeployed the cash into single-family home rentals and data centers.

Over the past three years, the fund’s annualized return of 15.5% beat 90% of its peers.

Direct real estate investing is rarely hands-off. You need capital for a down payment, closing costs, inspections and renovations. You need to market the property, screen tenants, write leases, collect rent, respond to maintenance issues and deal with late payments.

You may need to hire contractors, handle unexpected repairs, replace appliances, manage vacancies and keep track of insurance, property taxes and utilities. Even small issues such as plumbing backups or a broken furnace can turn into costly emergencies that require immediate attention.

Over time, the hours involved can feel more like running a small business than owning a passive investment. For anyone who wants real estate exposure without that workload, real estate investment trusts, or REITs, are an appealing alternative.

And just as investors can buy sector-specific exchange-traded funds that target areas such as technology or energy, the popularity of real estate investing has led to a wide range of REIT ETFs. These funds bundle dozens or even hundreds of REITs into a single ticker, giving you diversified exposure across property types without needing to evaluate each one individually.

Why invest in a REIT ETF?

REITs own income-producing properties such as apartments, warehouses, data centers and medical offices. They are legally required to distribute at least 90% of their taxable income to shareholders. This often results in higher-than-average dividends, although the income is not always tax-efficient.

Even so, REIT investing is not as simple as it might seem. Unless you blindly buy individual REITs, you still need to evaluate them with the same level of care used for other sectors, but with more specialized knowledge that doesn't translate well from regular stocks.

For example, you need to understand occupancy ratios, which measure how much of the property portfolio is leased. You need to track same-store net operating income to see whether the REIT is growing the profitability of its existing properties.

Earnings per share are not useful here because REITs rely on a different measure called funds from operations, or FFO, that accounts for depreciation on their properties. You need to know whether the dividend payout is reasonable relative to FFO. You also need to understand why a REIT may issue new shares and dilute existing holders, and whether it has access to liquidity through credit facilities, revolving credit lines or other sources of funding.

All of this can turn REIT stock picking into a full-time hobby, which defeats the purpose for investors who want simple, transparent real-estate exposure while remaining hands-off.

But a diversified REIT ETF can handle the analysis, portfolio construction and rebalancing for you. You might not get the occasional multibagger that comes from owning a single standout REIT, but you do get broad property exposure, steady income and far more of your time back.

Moreover, REIT ETFs help reduce idiosyncratic risk. Individual REITs do not operate in a vacuum. Their fortunes depend on the tenants leasing their properties, and these tenants vary widely across the real estate universe.

For example, a residential REIT focused on apartments faces very different drivers of risk compared to a health care REIT that owns retirement communities. An industrial REIT managing self-storage facilities does not move in lockstep with a commercial REIT that owns class A office towers in Manhattan.

The COVID-19 period made this clear. Senior care homes and office buildings faced severe challenges, while warehouse properties tied to e-commerce demand surged. Self-storage benefited as people downsized or reorganized their living situations.

This variety is exactly why diversification matters. Each property type moves through its own cycle, with peaks and troughs that rarely line up. Holding a basket of REITs averages these effects out, smoothing the experience for investors and reducing the impact of any one weak segment.

A diversified REIT ETF captures the broad trends, avoids concentrated bets on any single property type, and provides a more stable path to real estate income.

How we picked the best REIT ETFs

Picking the best REIT ETFs is more nuanced than it appears. This is a specialized segment, and the right choice depends heavily on an investor's risk tolerance and objectives. To make our list broadly applicable, we approached it from a simple question: Which REIT ETFs would best complement a diversified portfolio of stocks and bonds?

With that in mind, we immediately ruled out several types of REIT ETFs that are too narrow for most investors. A popular theme since 2023 has been data-center REITs tied to the AI boom. These carry significant idiosyncratic risk and behave more like technology stocks, which defeats the purpose of adding real estate for stability and income. We also excluded ETFs that focus only on residential properties, since many investors already have exposure through homeownership.

Mortgage REITs were removed as well. Although they include "REIT" in their name, they do not own physical property. They invest in mortgage-backed securities and rely on borrowing at short-term rates to buy longer-dated assets, aiming to profit from the spread. This carries meaningful risk, especially when interest rates rise, even though these REITs often advertise very high yields.

After narrowing the universe, we applied our usual three-part criteria:

1. Fees: We capped expense ratios at 0.15% to ensure investors keep as much income and appreciation as possible.
2. Liquidity: We required a 30-day median bid-ask spread of 0.10% or less to minimize trading slippage.
3. Assets under management: We limited our selection to ETFs with at least $1 billion in AUM to reduce closure risk and benefit from economies of scale.

• Assets under management: $37.0 billion
• Expenses: 0.13%
• Yield: 3.6%
• 30-day median bid-ask spread: 0.01%

Vanguard's flagship REIT ETF is the Vanguard Real Estate ETF (VNQ). It tracks the MSCI US Investable Market Real Estate 25/50 Index and provides broad exposure to publicly listed real estate companies.

About 14.5% of the fund is allocated to a Vanguard institutional real estate index fund, with the remainder is invested directly in a wide mix of REITs. This multi-sector approach covers retail, industrial and health care REITs as its largest subsectors.

One important detail is that VNQ is not a pure-play REIT ETF. It holds a small portion of real estate operating and development companies that are not structured as REITs.

Another distinction is that VNQ does not report a 30-day SEC yield. Instead, it reports an unadjusted effective yield that reflects the distribution amount, including possible return of capital and capital gains.

Learn more about VNQ at the Vanguard provider site.

• Assets under management: $7.3 billion
• Expenses: 0.08%
• Yield: 3.5%
• 30-day median bid-ask spread: 0.02%

The State Street Real Estate Select Sector SPDR ETF (XLRE) is part of State Street's lineup of 11 "Select Sector" ETFs, each representing a slice of the S&P 500. This means the 31 REITs in XLRE are all large or mid-cap stocks that already meet the S&P 500's screens for size, liquidity and earnings consistency.

Because XLRE is market-cap-weighted, its top holdings look similar to those found in VNQ, though the portfolio is more concentrated and skews toward larger REITs.

Liquidity is a major advantage here, with tight spreads and high trading volumes. XLRE also has a full options chain, which is useful for investors who want to implement strategies such as covered calls.

Learn more about XLRE at the State Street provider site.

• Assets under management: $3.5 billion
• Expenses: 0.08%
• Yield: 2.8%
• 30-day median bid-ask spread: 0.03%

The iShares Core U.S. REIT ETF (USRT) is part of iShares' "Core" family of low-cost, broadly diversified index funds meant for long-term portfolios.

While iShares offers other real estate-focused funds, including mortgage REITs and more specialized property types such as residential, USRT is the most general-purpose and beginner-friendly.

It tracks the FTSE Nareit Equity REITs 40 Act Capped Index. Although this benchmark differs from the ones used by VNQ and XLRE, market-cap weighting and the limited number of large REITs available mean the top holdings look familiar across all three. This overlap also makes USRT a useful tax-loss harvesting partner for either VNQ or XLRE.

Learn more about USRT at the iShares provider site.

• Assets under management: $9.2 billion
• Expenses: 0.07%
• Yield: 2.8%
• 30-day median bid-ask spread: 0.04%

The Schwab U.S. REIT ETF (SCHH) is one of the most affordable REIT ETFs available. Its 0.07% expense ratio equates to $7 in annual fees for a $10,000 investment.

SCHH tracks the Dow Jones Equity All REIT Capped Index, which includes 124 REITs and excludes mortgage REITs and hybrid REITs. These exclusions help keep the portfolio focused on companies that directly own physical properties.

Despite differences in index construction, SCHH's top holdings and subsector weights are similar to VNQ and USRT, given the limited number of large, liquid U.S. REITs. This similarity also makes SCHH a suitable option for tax-loss harvesting when REITs experience meaningful drawdowns.

Learn more about SCHH at the Schwab provider site.

• Assets under management: $1.4 billion
• Expenses: 0.08%
• Yield: 3.6%
• 30-day median bid-ask spread: 0.04%

Fidelity is best known for its mutual funds, but its ETF lineup has expanded steadily. The Fidelity MSCI Real Estate Index ETF (FREL) is Fidelity's primary index-based REIT ETF, sitting alongside the more expensive actively managed Fidelity Real Estate Investment ETF (FPRO).

FREL is priced competitively with the other low-cost options on this list. It tracks the MSCI USA IMI Real Estate Index. Instead of full replication, the fund uses a sampling approach, holding a representative subset of securities rather than every REIT in the index.

This helps reduce trading costs while still maintaining similar performance and risk characteristics to the benchmark.

Learn more about FREL at the Fidelity provider site.

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Six months ago, I forecasted that bonds of all stripes would extend their winnings this year. Then fears of inflation and rising interest rates sent Treasury and corporate bond yields up and sent bond prices, which move in the opposite direction, down 5% or more over the first three months of 2021 – with the exception of high-yield "junk" bond prices.

Although long-term interest rates, including corporate and Treasury yields, leveled off in April and backslid in May, my prophecy of positive total returns is in manifest jeopardy.

Through May 7, the Vanguard Total Bond Market ETF (BND) shows a loss of 2.5%. If that continues, 2021 would be the first down year for this popular yardstick since 2013.

Even Dodge & Cox Income (DODIX), the gold standard for actively managed general bond funds, is off 1.4%. Active bond managers can still beat the indexes, but no team of managers, analysts and traders can fight off every headwind.

However, as I have written for years, there is more to investing in bonds than riding interest rates. And enough good things are happening in the economy and assorted fixed-income sectors for me to say to stand firm.

Stronger oil prices, better jobs numbers and much sounder than expected state and local government finances all imply, in different ways, better second-half prospects – perhaps not for T-bonds, but for other types of income-driven or debt securities.

For example, giant mortgage real estate investment trust Annaly Capital Management (NLY) is up 11% this year while paying a 22-cent quarterly dividend that is more secure now than several months ago.

I would not argue that the shares of pipeline owner Magellan Midstream Partners (MMP) are like a bond, but Magellan is a reliable fountain of income whose share price is up from $41 as it maintains the same high dividend it delivered through the darkest days of the pandemic.

My go-to floating-rate bank fund choice, Fidelity Floating Rate High Income (FFRHX), yielding 3%, has a year-to-date total return of 2.8%, suggesting that the chances are strong the fund will notch its sixth straight year in the green.

What do these picks have in common? Their high yields, or high fund distributions, continue to attract savers and investors while a tight supply of comparable names supports their prices and economic vigor adds to their appeal. There is now more risk in low-yielding three- to five-year Treasuries than in most bonds "with coupons north of 4%," says Phil Toews, of Toews Asset Management.

The U.S. is poised to make back the economic growth that it lost last year, then return in 2022 to the pre-COVID and super-investor-friendly backdrop of moderate growth and inflation and 2% long-term Treasury yields.

And it will do this at a time when households have built enormous cash reserves, paid down debts and generally regained confidence in the economy and the markets without scaring the Federal Reserve into tightening credit and humiliating us committed bond bulls.

Toward that end, I would add preferred stocks (or funds) and well-managed high-yield bond funds to the shopping list.

If you insist on the full faith and credit of Uncle Sam, a low-cost Ginnie Mae mortgage fund will give you a return that's a percentage point or so better than a Treasury-heavy portfolio.

I still like municipals, which are helped by robust demand compared with their modest supply, as well as congressional aid to transit systems, airports and the like. In all, some of us will still end 2021 with small losses on fixed-income and others with small gains. But the rough first quarter is already a memory.

If you're looking for income investments in 2021, best of luck. While bond yields are bouncing back, the 10-year still yields a paltry 1.6%, and the S&P 500 yields even less.

If you need a far greater yield than that from the income portion of your investment portfolio, you might consider investing in pass-through securities. These are defined as securities that pass through a majority of their capital gains and investment income.

Four major types of pass-through securities include closed-end funds (CEFs), real estate investment trusts (REITs), business development companies (BDCs), and master limited partnerships (MLPs).

Let's take CEFs, for example. According to BlackRock, the average yield for CEFs in the fourth quarter of 2020 was 7.8% and 11.5% based on net asset value (NAV) and market price, respectively. That's not just better than the S&P 500 and 10-year T-notes – that's better than almost anything else you can find on the market. The same is generally true for the other pass-through security types.

If you're willing to look beyond Wall Street's best-traveled areas of yield, read on as we discuss 10 income investments that stand out among the most interesting opportunities.

Data is as of March 15. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.

• Market value: $8.3 billion
• Dividend yield: 8.5%

The first of two business development companies (BDCs), Ares Capital Corporation (ARCC, $18.88), is one of the largest direct lenders in the U.S. It looks for companies with stable cash flow, a large moat, growth prospects and a seasoned management team.

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Business development companies are income investments that provide funding to small and midsized businesses. In this case, Ares Capital provides all kinds of loans, including lines of credit, first and second liens and subordinated loans. It also makes non-control equity investments, although those represent just 15% of its $15.5 billion portfolio.

The portfolio of loans and equity has been made to more than 350 companies backed by 172 different private equity firms.

If you want to know who the players are in middle-market private equity, all you need to do is look through a list of Ares' investments. You'll quickly see who owns what.

Since its IPO in October 2004, Ares Capital has invested approximately $63 billion in middle-market lending across more than 1,400 transactions, generating a realized asset level gross internal rate of return (IRR) of 14%. It also has generated a total cumulative return since its IPO that's 50% higher than the S&P 500.

It is externally managed by Ares Management (ARES), which manages more than $197 billion in assets under management, including $146 billion from direct lending and other credit-related investment strategies.

ARCC might not make you rich overnight. But it should be a worthwhile income investment, providing high and stable yield over the long haul.

• Market value: $986.5 million
• Dividend yield: 8.9%

Bain Capital Specialty Finance (BCSF, $15.28) is another BDC, this one externally managed by BCSF Advisors LP, a subsidiary of Bain Capital. U.S. senator and one-time presidential candidate Mitt Romney launched the alternative asset manager in 1984 after rising the ranks at the consultant Bain & Company, which provided seed money. (Romney left in 1999.)

BCSF commenced operations in October 2016. It went public two years later, in November 2018, raising $152 million in its initial public offering. Since its 2016 launch, the BDC has grown total assets to $2.60 billion, and total net assets to $1.07 billion.

A majority of the BDC's investment portfolio is dedicated to first lien senior secured loans, which accounted for 87% of its $2.5 billion in fair value at the end of 2020. BCSF generated $183 million in interest from its investments, along with $9.3 million in dividend income and $2.1 million from other income-producing securities.

The BDC continues to strengthen its balance sheet while delivering strong earnings for shareholders. The weighted average yield during Q4 at fair value was 7.5%, 20 basis points higher than in the third quarter. The BDC's outstanding debt had a weighted average interest rate of 3.2%, providing an attractive 430-basis-point spread between what it brings in and what it pays out.

Looking forward, BCSF announced in February a strategic partnership with London-based asset manager Pantheon to provide direct lending to middle-market companies in Europe and Australia, which should deliver greater global capabilities. Bain Capital is contributing $320 million in senior secured loans to the joint venture, and it will own 70.5% of the joint venture. Pantheon will hold the rest.

• Market value: $2.1 billion
• Dividend yield: 7.8%

The first of two real estate investment trusts, Arbor Realty Trust (ABR, $16.91), provides mortgages for owners of multifamily and commercial real estate assets. This mortgage REIT (mREIT), which got its start in 2003, operates two businesses: Structured Loan Origination and Investments, and Agency Loan Origination and Servicing.

Arbor's structured business invests in a portfolio of bridge and mezzanine loans for multifamily, single-family rental and commercial real estate. It also invests in actual real estate and real estate-related notes and other securities. The agency business originates and services multifamily loans for third parties such as Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) and several other federal government housing agencies.

In its most recent quarterly report, Arbor announced that its agency business had grown by 23% in 2020, to $24.6 billion. That included record Q4 loan originations of $2.75 billion, up 87% year-over-year.

As for the REIT's structured business, its loan portfolio is now nearly $5.5 billion, almost 28% higher year-over-year.

"Arbor continues to be very well positioned to succeed in the current economic climate. Our business model gives us diversified opportunities for growth and has allowed us to outperform in the commercial mortgage REIT space," says Ivan Kaufman, CEO of Arbor Realty Trust.

Dividend growth is an important aspect of income investments, and Arbor is getting back on track on that front. ABR, which had been increasing its dividend quarterly until the pandemic hit, has started a new streak, recording three consecutive quarters of higher payouts. The latest upgrade was by a penny per share to 33 cents quarterly. Arbor's annual payment of $1.32 yields nearly 8%.

• Market value: $38.0 billion
• Dividend yield: 3.4%

Of the 10 income investments discussed in this article, datacenter REIT Digital Realty Trust (DLR, $135.07) leans the most on capital appreciation as opposed to income.

Over the past five years, the office and data center REIT delivered an annualized total return of 12.4%, more than double its peers. Of that, more than 3 percentage points was from dividends. While Digital Realty Trust's yield might not draw a crowd from income investors, its 15-year dividend growth streak should.

With the cloud and digitalization continuing to grow, data centers should continue to be in significant demand for the foreseeable future. DLR finished the fourth quarter ended Dec. 31, 2020, with 291 data centers and 35.9 million square feet of space available on six continents, including North America. It also has 5.4 million square feet under active development and another 2.3 million square feet for future expansion.

In fiscal 2021, it expects revenues of at least $4.25 billion with adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of at least $2.3 billion. That translates to "core" funds from operations (FFO, an important REIT profitability metric) of $6.45 per share at the midpoint. That's a 9% year-over-year revenue increase and a 4% increase in core FFO.

In the fourth quarter alone, Digital Realty signed new leases for 972,507 square feet worth $130.3 million on an annualized basis and $122 in base rent per square foot.

With a total debt of just $13.4 billion or 34% of its market cap, DLR remains a solid play for long-term income investors.

• Market value: $1.6 billion
• Distribution yield: 9.8%*

It's hard to imagine an energy-related income investment doing well over the past few years. Nonetheless, Tennessee-based master limited partnership (MLP) Delek Logistics Partners LP (DKL, $37.24) has delivered a five-year annualized total return of 12.7%, well more than twice the return of its midstream peers.

DKL was spun out from Delek US Holdings (DK) in November 2012. At the time, DK owned 66% of its units (shares of an MLP). Today, it owns 80% of the limited partnership.

According to its December 2020 presentation, Delek Logistics transports crude oil across more than 805 miles of pipeline. It also has storage capacity of more than 10 million barrels of oil. In addition to that, DKL owns a rail offloading facility and a wholesale marketing business that sells refined products from independent third parties and Delek U.S. refining operations.

In the company's most recently reported quarter, it earned 94 cents per unit of net income attributable to all partners, up from 52 cents per unit in the year-ago quarter. Distributable cash flow (DCF, an important metric that speaks to the sustainability of MLP distributions) was $55.9 million, from $33.0 million in Q4 2019. That gives the firm a DCF coverage ratio of 1.41x – much better than the 1.08x in the year-ago quarter – implying a much more secure distribution.

In a challenging operating environment, DKL continues to deliver the goods.

• Assets under management: $964.0 million
• Distribution rate: 10.3%*
• Expenses: 1.75%**

Closed-end funds (CEFs), unlike open-ended mutual funds, trade on an exchange, and do so at a limited number of shares outstanding. As a result, they can trade at a discount or premium to the net asset value of the fund's assets, depending on investor interest and other factors.

CEFs also tend to offer up large distributions, so we'll cover three of them here. First up is Guggenheim Strategic Opportunity Fund (GOF, $21.08), which seeks to maximize returns utilizing both quantitative and qualitative analysis to find investments that are trading below their fair value.

GOF can invest up to 20% of its total assets in non-U.S. dollar-denominated fixed-income securities, up to 50% of its assets in common stocks, and up to 30% in investment funds that invest in securities GOF already owns directly. Lastly, it can invest as much as it wants in junk bonds.

The CEF uses leverage to enhance its returns beyond what an unleveraged fund might achieve. Leveraging does add an element of risk to the fund by increasing the potential losses. At present, the fund's leverage is 37.7% or $363 million of its $964 million in total assets.

Since its inception in July 2007, GOF has achieved an annualized total return of 11.6% through Dec. 31, 2020. Over the past year, it has earned a total return of roughly 47%.

The CEF pays a monthly distribution of 18.21 cents per share. On an annualized basis, that yields more than 10%.

The only downside of buying GOF right now is its significant premium. It currently trades at a 20% premium to its NAV, which is more than double its five-year average premium of 8.1%.

* Distributions can be a combination of dividends, interest income, realized capital gains and return of capital.

** Includes interest expenses.

Learn more about GOF at the Guggenheim provider site.

• Assets under management: $702.9 million
• Distribution Rate: 8.1%
• Expenses: 3.59%*

The Invesco Dynamic Credit Opportunities Fund (VTA, $11.16) invests in corporate variable-rate and fixed-rate loans made to businesses across many sectors, industries and geographic regions.

Its primary goal is to provide a high level of income to investors, with capital appreciation being a secondary consideration.

Of the fund's 536 bond holdings, the vast majority are non-investment-grade, or "junk." However, the fund's Senior Portfolio Manager, Scott Baskind, is head of Invesco's Global Private Credit business and has been with Invesco since 1999. His experience with corporate loans dates back to the mid-1990s. In other words, VTA is being run by someone who knows how to select opportunities in the junk-bond market.

Like GOF, Invesco's fund is allowed to use leverage to enhance returns. At the end of December 2020, it had 29% leverage and $201 million outstanding.

Dynamic Credit Opportunities' top 20 weightings accounted for 27.5% of its total portfolio at last check. The average loan in its portfolio was $2.6 million.

VTA pays a monthly distribution rate of 7.5 cents per share, which annualizes to an 8%-plus yield. It currently trades at a 7.7% discount to NAV, but that's still a little narrower than its five-year average discount of closer to 11%.

* Includes interest expenses.

Learn more about VTA at the Invesco provider site.

• Assets under management: $673.8 million
• Distribution rate: 8.3%
• Expenses: 2.36%*

The final of three CEFs is the BlackRock Multi-Sector Income Trust (BIT, $17.95). It invests at least 80% of its assets in loans and debt instruments or through synthetic derivatives to generate above-average current income and future capital appreciation.

Since its inception in February 2013, BIT has achieved an annual total return of 7.6% through Dec. 31, 2020, 119 basis points less than its NAV return over the same period.

Its portfolio contains nearly 2,300 holdings. The U.S. represents 77% of its assets, while China, the United Kingdom, and Canada are weighted slightly above 2%. France, Luxembourg, Mexico and others round out its geographic representation.

Like the other two CEFs, BIT uses leverage. It currently uses roughly 34% leverage, or $351.1 million outstanding. The typical loan's principal is repaid after 10.2 years.

And like VTA, BIT also owns a lot of non-investment-grade debt. But a higher percentage of its portfolio (~30%, versus ~7% for VTA) is in BB-rated debt or higher (investment-grade).

You can buy BIT's assets at a small 2.7% discount to NAV at the moment – not bad, but a smaller discount than its five-year average of 8.9%.

* Includes interest expenses.

Learn more about BIT at the BlackRock provider site.

• Assets under management: $1.4 billion
• SEC yield: 5.1%
• Expenses: 0.23%

As its name suggests, the Global X US Preferred ETF (PFFD, $25.41) invests in a basket of preferred stocks. PFFD tracks the performance of the ICE BofAML Diversified Core U.S. Preferred Securities Index.

The index invests in several preferred stock categories, including floating-rate, variable-rate, and fixed-rate preferreds, cumulative and non-cumulative preferreds, and trust preferreds. All securities included in the index must be listed on a U.S. stock exchange.

Investors often avoid preferred shares because they're considered hybrid securities, neither equity nor debt instrument. However, they can play a useful role for anyone looking to generate income from their investment portfolio.

PFFD provides investors with a higher yield than you might get from traditional dividend-paying stocks while doing so monthly. Equally important, it charges annual expenses that are less than many of its competitors.

Since its inception in September 2017, Global X US Preferred has delivered an annualized total return of 6.9%. It might not be the sexiest investment out there, but it has managed to attract more than $1.4 billion from investors, which says it has more going for it than meets the eye.

Its 290 holdings include preferreds issued by Bank of America (BAC), Danaher (DHR) and NextEra Energy (NEE).

Learn more about PFFD at the Global X provider site.

• Assets under management: $34.3 million
• Dividend yield: 9.2%
• Expenses: 3.19%*

The GraniteShares HIPS US High Income ETF (HIPS, $14.76) is one of the most expensive income investments on this list at 3.19% in annual expenses. But it's important to note that if you invested in each of its 61 holdings individually, you'd still be eating most of those same fees.

HIPS, which stands for "high-income pass-through securities," seeks to track the performance of the TFMS HIPS Index, which invests in … well, high-income securities with pass-through structures.

With HIPS, you leave the investment selection to the index provider. It selects the 15 securities with the highest yields and lowest volatility from all four high-income categories: MLPs, REITs, BDCs and CEFs. All of the securities are equally weighted. It then adjusts the weight of each sector to limit volatility. Each of the four must have at least a 15% weighting; the MLPs cannot exceed 25%.

The index is reconstituted once a year. It rebalances if the MLP weighting at the end of a quarter exceeds 25%. Currently, CEFs account for slightly more than 55% of HIPS's assets. BDCs, REITs and MLPs were each around 15%.

HIPS has maintained a 10.75-cent monthly distribution per unit since inception. And a nice bonus: the ETF doesn't generate a K-1 tax form – something you'd have to deal with if you individually owned any of the partnerships it holds.

* Includes acquired fund fees and other expenses

Learn more about HIPS at the GraniteShares provider site.

Investors looking to bolster their income portfolios have long looked to dividend-friendly real estate investment trusts (REITs) to get the job done. But recently, the appeal of high-yield REITs has intensified, thanks to changes to conventional investing wisdom.

For more than a quarter century, the "4% rule" governed many investors' withdrawals from retirement savings. According to this rule, investors would have sufficient funds in their portfolio to last a lifetime if no more than 4% was withdrawn from the portfolio in year one of retirement, with the withdrawal rate in subsequent years increasing only as much as needed to keep pace with inflation. Dividend investors, then, could comply with the 4% rule and never need to touch their principal by building a portfolio that yields 4%.

Times change, however. Financial advisor Bill Bengen, who created the 4% rule, recently updated his advice in the October issue of Financial Advisor magazine. Bengen now thinks 5%, not 4%, is the right amount for retirees to withdraw annually in the current low inflation environment.

For dividend investors who want to preserve principle, that means designing a portfolio that yields 5%.

The problem? You might have noticed that stocks paying 5% in dividends are hard to come by, especially in today's richly valued stock market. But a good place to start is with REITs, whose above-average yields are largely a product of the REIT structure requiring the majority of taxable earnings to be paid as dividends.

Here are 11 high-yield REITs with a collective average yield of more than 5%. Some have been more battered than others by the pandemic, but all have solid balance sheets that are keeping them afloat as they weather the COVID-19 storm.

Data is as of Nov. 19. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.

• Market value: $12.3 billion
• Dividend yield: 6.0%

W.P. Carey (WPC, $70.03) is a leading net-lease REIT that invests in high-quality, single-tenant properties. Net-lease REITs reduce risk by passing property-specific expenses (usually maintenance, insurance and taxes) directly along to the tenant and embedding contractual rent increases in leases. That makes the REIT's income more predictable and reliable.

W.P. Carey owns 1,216 properties across the U.S. and western Europe. Its properties are leased to 352 different tenants. The REIT boasts a well-diversified tenant base, with industrial, warehouse and office properties representing nearly 70% of the portfolio and only 17% retail exposure, which has helped to reduce the effects of the pandemic on 2020 occupancies and rents.

During the June quarter, the portfolio showed a 98.9% occupancy rate and average remaining lease term of 10.7 years.

A portfolio diversified by property type helped to keep rent collections strong during the third quarter, with 100% collection for self-storage, office and retail, 99% for industrial and 94% for warehouse. Adjusted funds from operations (FFO, an important profitability metric for REITs) declined 11.5% on a per-share basis but exceeded analyst estimates.

With over $1.9 billion of liquidity, WP Carey will be able to step up investments in new properties, which should fuel 2021 AFFO growth.

W.P. Carey also continues to be one of the most attractive high-yield REITs because of its slow but frequent and persistent dividend growth. The company hiked its quarterly payout for a 78th consecutive quarter in September, from $1.042 per share in June to $1.0440. AFFO payout ratio is also low for a REIT, at 85%, giving W.P. Carey additional flexibility to continue hiking dividends.

• Market value: $6.9 billion
• Dividend yield: 5.2%

Another REIT investing in single-tenant net-lease properties is National Retail Properties (NNN, $40.13). This REIT has tenants across 37 different industries, though its largest tenants are convenience stores, quick-service restaurants and automotive service providers. Its portfolio consists of 3,114 properties leased to 380 tenants and spread across 48 states.

The quality and diversity of its tenants has enabled this REIT to maintain occupancy rates well above the REIT average for 17 years and deliver 5.8% annual core FFO per share growth since 2014. As noteworthy, National Retail has generated 31 consecutive years of dividend growth while actually reducing its payout ratio over time. Payout during the third quarter was a safe 84% of FFO.

The REIT's core FFO per share fell by just 4% during the first nine months of 2020, and the company maintained a 98.4% occupancy rate. A solid balance sheet showing $294.9 million of cash, the full amount available on a $900 million line of credit and no debt maturities before 2023 gives NNN great financial flexibility.

National Retail Properties actively manages its portfolio, too, with 21 properties acquired for $74.1 million so far this year and 25 sold that generated a $13.6 million gain on sales.

NNN was highlighted at the beginning of 2020 as one of the best retirement stocks to buy, and it continues to prove its worth as a long-term investment. This high-yield REIT has generated 11.1% average annual total returns over the past quarter-century, fueled in part by a dividend that has grown for 31 consecutive years.

• Market value: $10.3 billion
• Dividend yield: 5.6%

Medical Properties Trust (MPW, $19.23) is a healthcare REIT that invests in hospitals; it owns 385 hospital properties representing 42,000 licensed beds and spread across nine countries. Medical Properties Trust leases facilities to 46 hospital systems and ranks as the second largest owner of hospital beds in the U.S. Hospital systems enter into sale-leaseback arrangements with the REIT to monetize real estate assets and reduce operating costs.

MPW has delivered 30% annual asset growth and 8% annual FFO per share gains over the past decade. That has helped a short string of seven consecutive years of dividend increases, with growth averaging a modest 4% annually.

During the first nine months of 2020, Medical Properties Trust grew FFO per share by 15% and closed $3.1 billion of acquisitions, with more deals scheduled to close in late 2020 as the REIT capitalizes on acquisition opportunities created by the pandemic. The effect of COVID-19 on its operations has been minimal. Medical Properties Trust expects to collect 98% of cash rents and interest payments due to it in calendar 2020.

"The REIT has already purchased $3 billion YTD and more is likely to come-making 2020 the second largest year for acquisitions in the company's history," write Stifel analysts, who rate the stock at Buy. "This leads us to project strong earning's growth in 2020 and 2021 of 20% and 6%, respectively."

They add that valuations on MPW remain attractive.

Mizuho analyst Omotayo Okusanya also upgraded the stock months ago, citing solid rent collections and an improved acquisition outlook as reasons for earnings upside.

• Market value: $5.6 billion
• Dividend yield: 4.7%

American Campus Communities (ACC, $40.38) is the country's largest developer, manager and owner of student housing. The REIT owns 160 student housing properties and manages a total portfolio of 139,900 beds across 204 properties.

The pandemic effect is evident, given FFO that was off 26.6% through the first nine months of the year. But the student housing market is bouncing back faster than anticipated. The REIT's portfolio was 90.3% leased in September and ACC was able to obtain a 1% rate increase. According to The Chronicle of Higher Education, 63 of the 68 universities where the company supplies housing planned to return to on-site classes or a hybrid in-person model during the fall semester, versus only five that remained primarily on-line.

The REIT has development projects underway at University of Southern California, San Francisco State University and the Disney College Program (part of Walt Disney World Resort) that should contribute to a post-COVID rebound. These projects add housing for the 2021 academic year in markets where universities are reducing on-campus housing by over 55,000 beds.

American Campus Communities remains strong financially with more than $44 million of cash, $813 million available on its credit line and no remaining debt maturities in 2020.

While payout ratios are currently higher than the company's historical targets because of COVID's effects on FFO, the company kept its 47-cent-per-share dividend intact in November. Bill Bayless, American Campus Communities CEO, stressed that "our strong liquidity position and the long-term stability of our operating performance has provided the Board of Directors the confidence that the company can safely absorb the short-term disruption to cash flows and still meet all of its capital needs while maintaining our dividend at current levels."

Commenting on student housing REITs and ACC, Piper Sandler analyst Alexander Goldfarb (Hold) said in October that "while live-on requirements were waived for 2020/2021, there is a good chance that reverts next year." That bodes well for this high-yield REIT in 2021.

• Market value: $16.5 billion
• Dividend yield: 4.8%

Healthcare REIT Healthpeak Properties (PEAK, $30.60) owns 633 properties, balanced across the life sciences, senior housing and medical office sectors. The life sciences portfolio consists of lab and office space focusing on three leading medical research markets (San Francisco, San Diego and Boston), with properties typically located in business park or campus settings. Medical office properties are located adjacent to hospitals and leased to hospitals or physician groups.

Income from senior housing properties declined in the first nine months of 2020 due to pandemic effects, but was offset by strength in the life sciences and medical office portfolios, which grew income 5.7% and 2.3%, respectively. Adjusted FFO has declined, but by a modest 7% or so.

The company has better-than-average liquidity to ride out COVID-related disruptions. Total liquidity is $2.6 billion, including $2.4 billion available on its $2.5 billion revolving credit facility, as well as $150 million in cash and cash equivalents and no material debt maturities before 2023.

Longer-term, this high-yield REIT should benefit from demographic trends that include aging baby boomers demanding new treatments and medical devices, increased outpatient services and more seniors requiring daily living assistance. In addition, the company boasts a $1.2 billion development pipeline that is already 63% pre-leased.

Healthpeak was previously known as Healthcare REIT and cut its dividend in 2017 after spinning off its nursing home business, marking the REIT's only dividend cut in 25 years. Since then, the company has paid a steady $1.48 annual dividend. The payout ratio has risen to about 90% in 2020 because of COVID, but it has averaged a safe sub-80% over the past four years.

• Market value: $8.4 billion
• Dividend yield: 4.5%

Store Capital (STOR, $32.00) is a net-lease REIT that invests in single tenant properties primarily across the quick service restaurant, health club, childhood learning and auto repair sectors. Its portfolio, which was 99.6% occupied as of 2020's third quarter consists of 2,587 properties leased to 511 tenants and spread across 49 states.

And it's a rare REIT in that it has Warren Buffett's seal of approval.

Portfolio growth helped fuel 6% revenue gains and 3% FFO per share growth during the first nine months of 2020. Store Capital collected 73% of contract rents and interest during the June quarter, rising to 90% by October.

The portfolio is valued at $9.3 billion, approximately 11% above the REIT's market capitalization. Remaining lease terms averaging 14 years with fewer than 3% of leases scheduled to expire within the next five years gives the portfolio great stability.

Store Capital has been a strong dividend grower among high-yield REITs, improving its payout by 40% since its 2015 initial public offering (IPO). The company recently reaffirmed its commitment to maintain the dividend at the current $1.40 annual rate. This is a dividend you can trust, too, given an extremely conservative payout ratio averaging 70% of FFO over the past five years.

• Market value: $2.9 billion
• Dividend yield: 6.7%

National Health Investors (NHI, $65.54) invests in retirement communities, skilled nursing facilities, medical office buildings and specialty hospitals. Its portfolio encompasses 243 properties leased to 37 operators and spread across 34 states.

NHI has outperformed healthcare REIT peers over the past six years, generating roughly 5% annual FFO per share growth and 6% dividend growth while maintaining modest payout at less than 80% of earnings.

The company's adjusted FFO per share grew nearly 7% in the first six months of 2020 as a result of improving occupancy trends and federal programs that are helping its operator tenants.

The COVID impact on the REIT has been minimal, as evidenced by 100% of contractual rents collected for the second quarter, 96.2% collected during the third and 92.7% in Q4 (to date). "The remaining balance relates primarily to one additional tenant concession as well as lower forecasted revenue from transitioned properties prior to the start of the pandemic," the company states.

One reason this REIT is great for retirees is its fortress-like balance sheet. NHI has very low leverage (4.8 times ratio of debt-to-adjusted EBITDA), $785 million of liquidity and no significant debt maturities before 2022.

NHI also is tops among these 11 high-yield REITs at a nearly 7% yield. The REIT improved its payout earlier this year with a 5% hike to $1.1025 per share.

• Market value: $6.0 billion
• Dividend yield: 4.7%

Another solid healthcare REIT is Healthcare Trust of America (HTA, $27.25), which is the country's largest owner/operator of medical office buildings. The REIT owns 467 medical office buildings comprising 25.1 million square feet of leasing space and valued at approximately $7.4 billion. Its footprint extends across 33 states, but most investments target 20 to 25 gateway markets where leading universities and medical institutions are located.

A decline in new leasing activity due to COVID has been offset by existing tenants seeking to extend their leases and cash collections totaled 102% of monthly rents during the third quarter (including collections on prior-period accounts). Occupancies were 89.5% and HTA executed 1.1 million square feet of leases during the quarter.

Most impressively, the company reported record FFO per share of 43 cents during the third quarter.

Like National Health Investors, this REIT has exceptional financial strength to carry it through the pandemic crisis, with total liquidity at $1.5 billion and less than $6 million of debt maturities before 2022. The REIT signaled its confidence in September by reactivating its $300 million share repurchase program and hiking its dividend by 1.6%.

"We 'met' with management during NAREIT, and we believe the REIT is in a strong position to continue modest growth over the next few years, even if the pandemic flares up during the winter months," write Stifel analysts, who rate NHI at Buy. "Internal growth should continue to be steady from lease renewals at higher rents (+5.1% YTD20), minimal collection issues, and controlled expense growth."

Raymond James analyst Jonathan Hughes has the stock at Outperform, recognizing that the stock's underperformance in 2020 has enhanced its risk/reward profile.

• Market value: $601.0 million
• Dividend yield: 5.0%

UMH Properties (UMH, $14.41) is a manufactured-housing REIT that owns and operates 124 manufactured-home communities together representing 23,400 developed homesites. Its housing communities are located in New Jersey, New York, Ohio, Pennsylvania, Tennessee, Indiana, Maryland and Michigan.

The company's growth strategy focuses on acquiring under-performing or under-developed communities and making site improvements that fuel growth in rents and occupancies.

COVID-19 has had virtually no impact on the REIT's 2020 operational performance. The company's FFO is actually up 8.7% across the first nine months of the year. UMH delivered a strong third quarter, with rental income up 10%, same-property occupancy up from 83.7% to 86.9%, and FFO per share up 20% year-over-year.

In addition, the REIT has increased availability on its credit line while reducing interest payments, trimmed its net debt to adjusted EBITDA from 6.6x at year's end to 5.8x at Q3's end, and acquired two communities containing about 310 homesites.

UMH has perhaps the stickiest dividend situation of these high-yield REITs, so handle with care. While it has paid dividends since 1990, its streak of payout raises stopped in 2008, when the recession forced a dividend cut. Since then, the payout has held steady, but at a high payout ratio averaging 98% over the past four years, and has exceeded 100% during the pandemic.

However, The REIT has announced plans to call its Series B Perpetual Preferred Stock, which management says should add $0.11 to annualized per share FFO, thus improving payout. "We believe a dividend increase in 2021 is likely given management commentary and significant decline in 2021E AFFO payout (from 96% to 73%)," say B. Riley analysts, expecting an increase from 72 cents per share across four quarterly payouts to 76 cents.

Berenberg analyst Keegan Carl initiated coverage of UMH with a "Buy" rating in October. He thinks the market is underestimating the solid fundamentals of manufactured housing REITs and expects above-average growth.

• Market value: $2.1 billion
• Dividend yield: 4.7%

Essential Properties Realty Trust (EPRT, $19.76) invests in single-tenant, net-lease properties across the US. At present, the REIT owns nearly 1,100 properties leased to 214 tenants spread across 16 different industries. At present, its properties are 99.6% leased and have remaining lease terms averaging a high 14.6 years.

Over 60% of the portfolio consists of e-commerce resistant businesses such as quick service restaurants, child learning facilities, car washes, medical office and convenience stores. Of these, only the child learnings segment (roughly 13% of the portfolio has been moderately impacted by the coronavirus.

Thanks to the essential nature of its portfolio, this small but resilient REIT managed to keep its adjusted FFO flat during the first nine months of 2020, generated 6% FFO per share growth during the first six months of 2020, invested nearly $360 million in 126 new properties that are already 100% leased and ended the third quarter in stellar financial shape with liquidity of about $490 million and a modest 4x ratio of net debt-to-EBITDA.

Essential Properties began paying dividends in 2019, a year after came public, and hiked those payouts twice that year for a total increase of nearly 10%, but has kept dividends level in 2020. Payout is at the low end of the REIT range at 82%.

EPRT is among the most loved high-yield REITs on this list, with several calling it a Buy and reiterating their views of late. Stifel, for instance, called out the company's "strong balance sheet" and one of the lowest net-debt-to-EBITDA ratios in the sector.

• Market value: $3.9 billion
• Dividend yield: 5.2%

Highwood Properties (HIW, $37.20) is an office REIT with an unusual twist; it owns and acquires properties in the best business districts of fast-growing "secondary" cities such as Atlanta, Charlotte, Nashville, Orlando, Pittsburgh, Raleigh, Richmond and Tampa. The REIT benefits from a migration of corporate tenants from cities such as New York, Los Angeles and Chicago to secondary markets where rents are lower and commutes are easier.

The REIT rents to high credit-quality tenants such as the federal government, Bank of America (BAC), Bridgestone Americas (BRDCY) and MetLife (MET).

Highwood has generated steady 4% FFO per share gains over the past decade. The REIT began paying dividends in 1994 and has grown annual payments 3% over five years. Payout is exceptionally modest for a REIT, sitting around the mid-50% area.

The strength of its markets and tenants is evidenced by third-quarter rent collections remaining strong at 99.7%. FFO per share for 2020's first nine months was up 12% year-over-year. Other highlights from its most recent report included 5.5% cash rent growth in Q3, and 660,000 square feet of second-gen office leases signed. That included the REIT's renewal of a Tampa lease with the FBI for 138,000 square feet, which was its largest lease expiration remaining in 2020.

Highwood Properties is well-positioned to grow from its $503 million development pipeline that is already 79% pre-leased, $719 million of liquidity for new deals and low 5x ratio of debt-to-adjusted EBITDA.

Morgan Stanley analyst Vikram Malhotra (Overweight, equivalent of Buy) likes the REIT's 95% Sun Belt exposure, mostly pre-leased development pipeline and well-covered dividend. Wells Fargo analyst Brendan Finn reiterated his Overweight rating on the stock in late September, too.

To say that 2020 has been full of surprises would be the understatement of the year.

Companies that might have seemed safe prior to the pandemic, such as conservative real estate investment trusts (REITs), were suddenly found to be risky when their tenants could no longer pay the rent. And flashy tech stocks – which in a more normal world might have seemed risky – suddenly found themselves selling mission-critical services.

Yet as upside down as the world is right now, some things really haven't changed, and that includes the appreciation investors have for reliable dividend stocks. The consistent payment of a dividend was, is, and likely always will be a sign of quality. Thus, new dividend stocks have, in a sense, finally made it.

"Few things better mark a quality company than the payment of a dividend," says John Del Vecchio, forensic accountant and co-manager of the AdvisorShares Ranger Equity Bear ETF (HDGE). "Earnings and even sales can be manipulated by an unscrupulous management team. But in order to pay the dividend, they have to have actual cash in the bank."

"Initiating a new dividend is often a sign that a company has matured into a stable and more durable business and one that's a lot less likely to disappoint," Del Vecchio added.

The data seems to support this. A study by Ned Davis Research found that the S&P 500 returned 7.70% per year between 1972 and 2017. But a portfolio consisting of only the dividend-paying stocks in the S&P 500 returned 9.25% per year over the same period, soundly beating the index. Non-payers generated paltry returns of just 2.61%.

Yes, the COVID-19 pandemic has been particularly hard on dividend payers and has forced many to slash their payouts or eliminate them altogether. But at the same time, plenty of companies are surviving and thriving in this environment enough to initiate a dividend or continue a recently initiated dividend.

Today, we're going to look at 20 new dividend stocks. While every pick isn't necessarily a recommendation – this is merely a list of recent dividend initiators – you can certainly use it as a starting point for further research.

Data is as of July 23. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.

• Market value: $3.6 billion
• Dividend yield: 1.1%
• First regular dividend: 2020

First up is Rexnord (RXN, $30.27). This company might have only initiated its dividend this year, but it has a long history in the American Midwest dating back to 1891. Originally started as a maker of industrial chain belts, RXN today manufactures advanced process and motion control and water management products.

Through its process and motion controls businesses, Rexnord is a manufacturing company that builds the machinery other manufacturing companies need to produce their own wares. And its water management products focus on water safety and drainage control. It's a unique and highly specialized collection of businesses.

With most of the world still in recession, Rexnord might have a few lean quarters in front of it. But if the larger trend of manufacturing returning from China to the U.S. continues to build steam, Rexnord should have a very bright future.

RXN joined this list of new dividend stocks this year with an 8-cent-per-share payout in March. It currently yields just more than 1%.

• Market value: $156.2 million
• Dividend yield: 1.5%
• First regular dividend: 2020

Provident Bancorp (PVBC, $8.02) is the parent company of Provident Bank, a small bank based in Amesbury, Massachusetts. Provident is small, with only eight offices in Massachusetts and New Hampshire. Yet the firm is the 10th-oldest financial institution in America and has a history dating back to 1828.

Despite the bank's pedigree, it has a short history as a public company. Its privately held holding company brought the bank public in 2015.

Provident's history as a dividend payer is even shorter. The bank paid its first dividend in May of this year and also initiated a stock repurchase plan.

Initiating a dividend at a time when much of the economy was shut down and many small businesses were having a hard time paying their loans was a bold move. And to be fair, the bank made the announcement on March 12, before the extent of the coronavirus disruptions was fully understood.

We probably shouldn't expect much in the way of dividend hikes over the next several quarters, and the share buybacks are likely on ice for a while, or at least until the economy is a little healthier. But PVBC seems to be sticking with the program, and has announced a dividend to be paid Aug. 13. Shares are down 36% year-to-date; value investors might want to give this one a deeper look.

• Market value: $156.2 million
• Dividend yield: 1.5%
• First regular dividend: 2020

HBT Financial (HBT, $8.02) is a bank holding company with controlling interests in Heartland Bank and Trust Company and the State Bank of Lincoln. The century-old bank, founded in 1920, is based in Bloomington, Illinois. HBT's subsidiaries have 64 locations scattered across Illinois and provide the basic services you'd expect from a community bank.

Yet despite its long history, HBT is brand-spanking new as a public company. The company executed its initial public offering (IPO) in December 2019. And the bank wasted little time in starting up payouts, initiating a cash distribution early in 2020 to join this list of new dividend stocks.

As with banks in general (and smaller banks in particular), HBT really got beaten up in the COVID-19 bear market. And it has really yet to recover. Shares are down about 35% year-to-date and yield 7.4%.

While there is a lot of uncertainty right now in the banking word due to the pandemic and the potentially slow recovery in consumer spending, the financial system has thus far remained strong and is well supported by the Federal Reserve. If you're a patient value investor, this sector definitely is worth a deeper dive.

• Market value: $33.3 billion
• Dividend yield: 0.6%
• First regular dividend: 2019

Next up is cellular tower REIT SBA Communications (SBAC, $298.68), which paid out its first dividend in September 2019.

SBA is a leading independent owner and operator of wireless communications infrastructure including towers, distributed antenna systems and small cells. It's active in 14 countries, with the largest being the United States, Brazil and Canada.

SBA was founded in 1989 but converted to the REIT structure in 2017. This is important and means that, while modest today, SBA's dividend should continue to grow for years to come. To legally avoid federal income tax, REITs are required by law to distribute at least 90% of their profits.

Furthermore, while many REITs are facing unprecedented challenges because of forced closures and decreased foot traffic, life has never been better for cell tower landlords. That shouldn't change anytime soon.

SBA initiated its dividend last August and has already hiked it once. Expect more of the same going forward.

• Market value: $307.6 million
• Dividend yield: 2.9%
• First regular dividend: 2020

The quarantine-related lockdowns hit working-class Americans a lot harder than white-collar professionals. While many office employees can continue to do their jobs from home, blue-collar and service workers generally can't.

This has created both opportunities and risk for non-traditional financial companies like CURO Group Holdings (CURO, $7.54).

CURO is non-bank lender serving what it calls "underbanked" consumers in the United States, Canada and United Kingdom. Its services include short-term loans, check cashing, prepaid debit cards and pawn-based lending.

Naturally, CURO's customers tend to be people with low credit. If you're a high-income earner with a country club membership, you're not likely to need a payday loan. It remains to be seen exactly how strapped for cash CURO's clients will be once the temporary unemployment benefits stemming from virus relief start to get phased out. But at the same time, it's possible that record numbers of people will need CURO's services as we continue to see economic fallout.

In any event, CURO's shares are down by more than half from their 52-week highs and yield 2.9% on a dividend that the company began paying in March of this year.

But just because CURO has joined the ranks of 2020's new dividend stocks doesn't necessarily make it a buy right away. At least two shareholder-rights firms are investigating the company over allegations that CURO misled investors about the negative effect of business changes in 2018, so you'll want to wait for the smoke to clear.

• Market value: $1.7 billion
• Dividend yield: 1.6%
• First regular dividend: 2019

Oil and gas has been a graveyard for investor capital in recent years, and income investors in particular have been particularly beaten up. Many energy firms have been forced to suspend or cut dividends this year as the industry grapples with structural oversupply and a dearth or demand due to virus quarantines and reduced travel.

And it's not just exploration and production companies suffering. Oilfield services companies and suppliers have also really struggled this year.

But one energy-related company is bucking the trend of dividend cuts. Cactus (WHD, $22.40) actually initiated its first dividend late last year, with a December payment.

Cactus designs and manufactures wellheads and pressure control equipment primarily to "nonconventional" onshore developers. In other words, Cactus sells its wares to frackers.

Needless to say, fracking isn't the best business to be in these days, which is why Cactus' share price is down by 35%. The company has already announced layoffs and salary reductions, lowering its headcount by about 30%.

If there's any good news, it's that the stock has been on a steady upswing since March. And WHD has managed to keep its dividend intact so far, including its 90-cent distribution delivered on June 18.

Be careful investing in this new dividend stock given the terrible macro environment for its customers. And if you do buy Cactus, you should be prepared for the possibility of a dividend cut. But at current prices, it is at least worth exploring as a value play.

• Market value: $1.3 billion
• Dividend yield: 1.1%
• First regular dividend: 2019

Financial stocks are well represented on this list of new dividend payers, which brings us to Victory Capital Holdings (VCTR, $19.07).

Victory manages about $127.7 billion in client assets. It also manages and distributes a suite of mutual funds as well as the VictoryShares family of ETFs.

Just a few months ago, this business would have seemed precarious. But with the major indices just a hair's breadth away from new all-time highs, life is looking pretty good for traditional asset managers whose revenues stem from the size of money under management. All else equal, a market move that sends stocks 20% higher equates to roughly 20% higher revenues.

This bull run that has been in place since late March might prove to be ephemeral. We frankly have no way to know if or when the next correction will strike. But until it does, traditional money managers like VCTR should enjoy this epic run.

Victory initiated its dividend last year, with its first payout in September 2019, and the shares currently yield 1.1%.

• Market value: $3.5 billion
• Dividend yield: 1.1%
• First regular dividend: 2018

Mortgage REITs got hammered during the March bear market, and many suffered permanent damage to their portfolios. With millions of Americans forced to seek forbearance protection, many mortgage note holders were left holding the bag.

But for mortgage servicers, it was mostly business as usual. And that brings us to our next recent dividend initiator, PennyMac Financial Services (PFSI, $44.38).

PennyMac is the third-largest mortgage producer in the U.S. and the sixth-largest mortgage servicer. But while it writes and services a ton of mortgages, it doesn't actually carry them of its books. Substantially all of its mortgages are sold to Fannie Mae, Freddie Mac or Ginnie Mae.

Apart from its mortgage origination and servicing businesses, PennyMac is also the manager of the PennyMac Mortgage Investment Trust (PMT), a mortgage REIT.

PennyMac's shares stumbled in March, but the stock has recovered and then some, gaining 30% year-to-date to new all-time highs. PFSI's stock price has doubled over the past two years, and this new dividend stock is showing no sign of slowing down.

• Market value: $213.0 million
• Dividend yield: 1.4%
• First regular dividend: 2019

SmartFinancial (SMBK, $14.00) might sound like a cutting-edge fintech company, but it's actually a sleepy little regional bank. SmartFinancial is the bank holding company for SmartBank, which has 29 branch locations scattered across Tennessee, Alabama, Florida and Georgia.

As with many small-town community banks, SmartFinancial has been active in the mergers-and-acquisitions game, acquiring Foothills Bank and Southern Community Bank in 2018.

SmartFinancial reinitiated its dividend in 2019 after taking a 10-year hiatus. The bank eliminated its dividend following the financial crisis and only restarted it last year.

Like most banks, SmartFinancial got hit hard in the March selloff and is still down nearly 40% from its 52-week highs. Low interest rates and the potential for loan defaults will be ongoing risks for this sector, but that would seem to be more than accounted for at today's prices.

• Market value: $502.0 million
• Dividend yield: 0.9%
• First regular dividend: 2019

Let's add one final bank holding company to the list in Byline Bancorp (BY, $13.08). BY is the holding company for Byline Bank, a community bank with a history going back a century. Byline is a regional bank for the upper Midwest and has more than 50 branches throughout the Chicago and Milwaukee metro areas.

Like most of the other bank holding companies on this list, Byline is a small-cap stock with a market cap of under $500 million. And 2020 has been a tough one for smaller banks. Here's a familiar refrain: BY shares still are down a third from their 52-week high.

Low interest rates erode bank profit margins, so the earnings outlook doesn't look great in the immediate future. But again, buying a healthy bank at a 33% discount to its recent highs would seem like a decent long-term bet. At current prices, Byline yields a little less than 1%.

• Market value: $6.0 billion
• Dividend yield: 2.0%
• First regular dividend: 2018

Smaller community banks have been major dividend initiators over the past few years, and most have managed to stay financially sound and healthy throughout the COVID-19 downturn. Let's add one more community bank to our list of recent dividend payers.

Signature Bank (SBNY, $111.58) is a regional bank with 32 private client offices mostly scattered around New York City. The bank also has offices in San Francisco, California, and Charlotte, North Carolina.

In the world of financial services, bigger is generally perceived as better. Yet Signature Bank has managed to carve out a profitable niche, targeting a smaller but wealthier clientele of business owners and senior managers.

Signature Bank has been in business since 2001 and publicly traded since 2004. SBNY joined this list of new dividend stocks in August 2018 when it paid out 56 cents per share, and it has maintained that payout ever since. At current prices, the dividend works out to a yield of 2%.

SBNY hasn't raised its dividend since initiating it two years ago, but future hikes are a very real possibility, given that the bank pays a conservative 22% of its profits as dividends.

• Market value: $21.5 billion
• Dividend yield: 1.8%
• First regular dividend: 2019

Corteva (CTVA, $28.67) is the child of divorce. In a whirlwind romance, Dow Chemical and DuPont de Nemours briefly merged to become a powerhouse chemical producer in 2017. Alas, there wasn't much of a honeymoon. Just two years later, the company split into three new companies: commodity chemical maker Dow (DOW), specialty chemical maker DuPont (DD) and agricultural supplier Corteva.

If that was hard to follow, don't feel bad. It's questionable how much sense it made to make the world's largest chemical company only to immediately dismantle it. But at least in Corteva, we have a focused play on agricultural technology.

Corteva has two segments: Seed and Crop Protection. Its Seed segment does exactly what its name suggests, boosting farm productivity by making seeds with protection against weeds, pests and disease. The company's Crop Protection segment manufactures herbicides, pesticides and other farming products.

It's not a scintillating business. But it's critical to feeding a growing global population.

Corteva paid shareholders a dividend for the first time on Sept. 13, 2019; at current prices, it yields 1.89%.

• Market value: $486.8 million
• Dividend yield: 0.9%
• First regular dividend: 2020

Cowen (COWN, $17.58) might not have the name recognition of a Goldman Sachs (GS) or a Morgan Stanley (MS), but it's in the same line of work. The company provides investment banking, research, sales and trading, prime brokerage and other services.

Founded in 1918 and based in New York, the company keeps a relatively low profile, at least by Wall Street standards.

The stock has been a wild ride, though. While COWN shares are close to three-year highs currently, they had lost two-thirds of their value in the depths of March – the same month it paid out its first dividend of 4 cents per share.

Taking a longer-term view, Cowen has been through a rough decade. At current prices, the stock has appreciated just 1%, in fairly volatile fashion.

It remains to be seen what the outlook for investment banks will look like as the world continues to reopen. While IPOs might be on ice for a while, we could see a surge in mergers and in debt offerings.

In any event, Cowen's shares have been surging higher since the March lows and don't appear to be losing their momentum. So, Mr. Market clearly believes the post-COVID world offers potential.

• Market value: $38.8 billion
• Dividend yield: 1.2%
• First regular dividend: 2019

Online auction and payments pioneer eBay (EBAY, $55.15) joined the ranks of new dividend stocks in early 2019 and has raised its payout in 2020, from 14 cents per share to 16 cents. More distribution growth is likely. At its current level, eBay is paying out only 27% of its profits in dividends.

At the current stock price, the dividend works out to a modest yield of 1.2%. That might not sound like much, but remember that most technology firms don't pay a dividend at all.

It might feel like eBay has been something of an also-ran in the e-commerce world it helped to create. Amazon.com and nimbler mobile apps capture most of the headlines, and its spun-off PayPal (PYPL) has made fintech headlines for years. But while eBay flies mostly under the radar, it's no slouch on the growth front. Revenues per share have nearly doubled since 2013, and the stock is up 53% in 2020.

As an older internet play, eBay may not be as exciting as the latest social media darling. But it has managed to survive for over two decades in the cutthroat world of e-commerce and has proven itself to be durable and shareholder-friendly.

• Market value: $3.9 billion
• Dividend yield: 2.2%
• First regular dividend: 2016

Valvoline (VVV, $21.07) is about as far from a trendy tech stock as you can get. It is one of America's oldest companies, with a history going back to 1866. And while we associate the brand with motor oil, Valvoline actually predates the invention of the automobile. In fact, its lubricant products helped to get the Industrial Revolution off the ground.

Yet despite its long history, Valvoline is a baby as a public company. It was spun off from Ashland (ASH) in 2016.

Valvoline paid its first dividend of 4.9 cents at the end of 2016, and it's already has juiced its dividend by 131% to a current 11.3 cents per share. Importantly, there's room for more; the company's dividend payout ratio is only 36%.

Valvoline might find waning demand for its lubricants and services due to the rise of electric vehicles over the next few decades. Electric vehicles have fewer moving parts and don't generally require regular oil changes. But even if a large percentage of new-car sales were electric vehicles starting today, the existing base of traditional gasoline-powered engines would be enough to keep VVV alive and kicking for a long time to come.

You shouldn't expect massive growth from an old-economy stock like Valvoline. But it should be a reliable dividend payer for the foreseeable future.

• Market value: $34.5 billion
• Dividend yield: 1.7%
• First regular dividend: 2015

Constellation Brands (STZ, $179.00) is the world's largest publicly traded wine producer. But beyond wine, the company is also a major beer producer. It markets under the Corona, Modelo and Pacifico Mexican brand names and has a large portfolio of craft beer brands, including Funky Buddha, Obregon Brewery and Ballast Point. Constellation also produces and sells an assortment of vodka, whiskey and tequila and other spirit brands.

Having the word "corona" in one of your most iconic products is an unfortunate coincidence in the age of COVID-19. But it hasn't seemed to slow down the company much, as the shares are essentially flat on the year.

STZ has been traded publicly since 1992 but only began paying a dividend in 2015. Since then, it has made up for lost time. Constellation has hiked its dividend by a cumulative 142%. Understandably, it hasn't topped up the payout yet in 2020.

• Market value: $48.2 billion
• Dividend yield: 0.8%
• First regular dividend: 2015

After months of virus lockdowns, the economy is looking rickety right now. And even as the economy continues to reopen, it might be years before we fully return to something resembling "normal," At this stage of the cycle, it's not a bad idea to look for recession-resistant companies that do well during hard times.

The COVID-19 experience has been disastrous for most brick-and-mortar retailers. But it has been smooth sailing for essential businesses like grocery and sundry stores. And with the economy likely to be slow for a while, consumers likely will trade down to cheaper alternatives such as dollar stores.

This brings us to Dollar General (DG, $191.65). Many working-class families depend on dollar stores for affordable packaged and processed foods, cleaning supplies, personal-care products, and basic groceries such as milk, eggs and bread.

Dollar General was founded in 1939 but only began paying a dividend in 2015. At current prices, it yields a little under 1%. There is a lot of competition in this space from other dollar stores and from large discounters such as Walmart (WMT). But if you believe that the economy might be depressed for a while, then Dollar General is worth considering.

• Market value: $7.4 billion
• Dividend yield: 0.4%
• First regular dividend: 2017

When you think of dividend payers, tech hardware companies generally aren't the first thing to come to mind. The cyclical nature of their business pushes them to hoard cash, and as a general rule, dividend investors have found the pickings slim in this space.

That's what makes Universal Display (OLED, $156.70) an unusual addition to this list of new dividend stocks.

Universal Display gets its distinctive trading symbol "OLED" from the products it makes: organic light-emitting diode (OLED) technologies used in flat-panel displays and lighting applications.

Universal Display has been publicly traded since 1996, but it didn't pay its first dividend until 2017. But it has been a dividend-raising monster ever since. The company made its first 3-cent-per-share payout in March 2017 and quickly doubled it in 2018. In 2019, it hiked its dividend by 67%, then by another 50% earlier this year.

Even with all that fuel behind the payout, OLED isn't exactly a high yielder. But if Universal Display continues to boost its dividend in such aggressive fashion, the yield will at least be respectable in the near-future. With a payout ratio of just 15%, more dividend growth is likely.

• Market value: $2.6 billion
• Dividend yield: 1.7%
• First regular dividend: 2019

You might not be familiar with SLM (SLM, $6.90), but you probably know it by its nickname: Sallie Mae.

SLM makes student loans. And contrary to popular belief, Sallie Mae is actually a private company. It isn't backed by Uncle Sam, though it used to be. The company was created as a government-sponsored enterprise in 1972 but transitioned to a private lender between 1997 and 2004.

Sallie Mae has become controversial. To its supporters, it has made higher education a reality for millions of Americans who would have never been able to afford it otherwise. To its detractors, the company has reduced an entire generation to debt slavery.

Sallie Mae suspended it in 2007 during the financial crisis. It then reinstated a dividend in 2011 only to kill it again three years later. SLM restarted its dividend yet again in March of last year, and it recently continued its streak of consecutive payouts with a dividend to be distributed Sept. 15.

Let's hope the third time is the charm.

Be careful with SLM stock. It has a history of dividend cuts, and its product is a political lightning rod. But shares also trade for a very modest 4 times earnings, so a good deal of risk would seem to already be priced in.

• Market value: $65.2 billion
• Dividend yield: 1.4%
• First regular dividend: 2015

We'll finish this list with data center operator Equinix (EQIX, $736.69).

REITs haven't fared well during the COVID crisis, as landlords have had to deal with financially strapped tenants. Data center REITs are a major exception, however.

Just as fossil fuels were critical in getting the Industrial Revolution off the ground, data is what drives the new economy. And not just social media or cloud operators. Large enterprises, banks and governments are using more and more data every day, and data center operators such as Equinix are a way to play this trend.

Equinix has a sprawling empire of more than 200 data centers spread across 24 countries. Suffice it to say that Equinix is an important part of the infrastructure connecting the world.

EQIX paid out its first regular quarterly dividend of $1.69 in March 2015. The company has since grown the dividend 57% to $2.66.

This is not the highest-yielding REIT, of course, at just 1.5%. But it's a healthy company selling a critical service to the new economy.

It hasn’t been a good year for landlords. Publicly traded real estate investment trusts—which own income-producing real estate—have been clobbered in 2020, with the category overall losing 13.6%, compared with a 5.0% loss for the S&P 500 index. When the COVID-19 pandemic struck, whole sectors of the economy shuttered practically overnight, and millions of Americans lost their jobs. For REITs that owned apartment buildings, shopping malls, hotels or office buildings, collecting rent became a tall task, and investors took notice.

But the sell-off presents an opportunity for investors who buy REITs that stand to prosper in a post-pandemic world and avoid the ones that might falter. REITs with properties that require little human contact have bright long-term prospects, says Fidelity Real Estate fund manager Steve Buller. Trusts that own data centers, industrial warehouses for online retailers or cell-phone towers will benefit in a world that is shifting increasingly online, he says. Some of this optimism is priced into the stocks—tech-oriented REITs in the S&P 500 have returned 11% in 2020, on average. But that shouldn’t scare off long-term investors.

Buller sees value in select housing and office REITs that will regain steam as the economy reopens, but he says investors will face an uphill climb investing in trusts that own restaurants, child care facilities, gyms and senior living facilities. REITs that own retail properties, he says, may be permanently scarred, as buying preferences shift toward e-commerce.

The REITs below are poised to thrive. All yield less than the 4.6% average for REITs overall but sport impressive profit-growth prospects, healthy balance sheets and a history of raising payouts.

Note that instead of using traditional corporate earnings yardsticks to measure profitability, REITs use funds from operations, or FFO, which adjusts for depreciation and property sales. REIT distributions are taxed as ordinary income, which can sting high-net-worth investors who hold them in taxable accounts (prices and other data are as of June 12).

(symbol ARE, price $159, yield 2.7%)

Alexandria owns, develops and operates life sciences office and laboratory space. The company rents to pharmaceutical and biotech firms such as Novartis, Eli Lilly and Biogen, as well as to research firms and the U.S. government. Dozens of Alexandria’s tenants are focused on COVID testing, treatment and prevention programs.

The firm’s property portfolio, with 30.9 million square feet of space, is 95% occupied. As landlords in other parts of the market saw large amounts of rent go unpaid, Alexandria collected 98.4% of its April rent. Leases among the trust’s top 20 tenants last for 11.4 years, on average.

Analysts at BofA Securities recommend the REIT, citing its strong demand and healthy balance sheet. The firm has hiked its payout by an average of 11% per year over the past decade.

(AMT, $258, 1.7%)

American Tower operates some 180,000 cell-phone and broadcast towers worldwide, with more than half of the firm’s revenues coming from 41,000 towers in the U.S. Wireless providers rent space on the towers to install the equipment that powers their networks, and they sign long leases (typically five to 10 years) that include annual rent hikes of 3% to 5% per year.

Growth in mobile data usage and the number of internet-connected devices should bolster revenues as wireless carriers upgrade their equipment and lease more tower space to keep up with demand. Analyst Matthew Dolgin at investment firm Morningstar says the upgrade to 5G network service should help American Tower boost tenant billings by 7% per year over the next five years.

At 1.7%, the shares yield less than the S&P 500’s 1.9%. But the firm’s payout has grown consistently, with hikes of 23% annualized since 2012. With the stock not far off its all-time high, investors may want to wait for a pullback.

(EQIX, $677, 1.6%)

Equinix operates data centers, which provide cooling, storage and security for equipment that companies pay to house at Equinix sites. Through fiber-optic cables, the firm connects more than 9,700 tenants to their customers, to each other, and to cloud service providers and telecom networks. Equinix allows businesses to access more cloud providers than any competing data-center business, says Dolgin. With more people working from home and businesses shifting to a model that includes a combination of their own hardware and multiple cloud services, Equinix’s prospects look bright, he says.

The stock has returned 36% over the past 12 months and isn’t cheap. But this post-pandemic beneficiary should pay off for long-term investors, says Baron Real Estate fund manager Jeff Kolitch, who expects the firm to boost FFO by an annualized 10% through 2022.

(INVH, $28, 2.2%)

Shares of Invitation Homes, which owns some 80,000 single-family rental homes, plunged 51% between late February and late March as investors feared that tenants would skip rent payments. But collections amid the pandemic hovered around Invitation’s historical average. Less than 2% of tenants deferred a portion of April’s rent.

The stock has bounced back accordingly. But it’s still 15% below its February high, despite looking poised to capitalize on long-term trends, such as a preference among millennial renters for spacious suburban homes as they begin to start families, says Kolitch. In­vitation should see strong demand due to the relative affordability of rentals (renting is cheaper than buying in 13 of the firm’s 15 markets) and the dearth of housing supply. Wall Street analysts expect the firm to increase FFO by 3% in 2020, followed by a 10% boost in 2021. Invitation hiked its payout 15% in February.

(PLD, $94, 2.5%)

COVID-induced stay-at-home orders likely ac­celerated the shift toward internet shopping, says Kyle Sanders, a stock analyst at investment firm Edward Jones. That bodes well for Prologis, which owns and develops high-tech distribution facilities needed to store, track and ship the items you buy online at retailers such as Amazon.com, Home Depot and Walmart.

In February, Prologis acquired rival logistics landlord Liberty Property Trust for $13 billion, boosting the Prologis portfolio to 965 million square feet spread across 4,660 buildings. Strong demand among retailers for well-located warehouses has contributed to the firm’s high occupancy rates (96%) and ability to consistently raise rents, says analyst Chris Kuiper at investment research firm CFRA. The REIT hiked its dividend 9.4% in March.

The Federal Reserve recently suggested that the U.S. economy will shrink by 6.5% – its worst annual performance since World War II. The Fed also expects unemployment to finish the year over 9%.

Those are good reasons to develop a heightened interest in high-yield ETFs (exchange-traded funds). That's because the Fed's key interest rate likely will hover around 0% for the next 24 to 36 months, leaving investors starved for income, while Fed Chairman Jerome Powell uses every tool at his disposal to help restart the economy.

"(The outbreak) will weigh heavily on economic activity. (It) poses considerable risks to the economic outlook," Powell stated June 10. "We're not even thinking about raising rates. We're not even thinking about thinking about raising rates."

That should make it all the more difficult to generate above-average income from equity and bond ETFs in the near to mid-term. Difficult … but not impossible.

Here are five high-yield ETFs delivering at least 4% in annual income that you can buy for the long-term

Data is as of June 16. Dividend yields represent the trailing 12-month yield, which is a standard measure for equity funds.

• Type: Real estate
• Assets under management: $30.1 billion
• Dividend yield: 4.1%
• Expenses: 0.12%

COVID-19 has definitely put real estate investors on edge.

Retail real estate investment trusts (REITs) have been hit by forced closures of non-essential businesses. And as remote working is adopted by American companies on a full-time basis, office REITs might experience some short-term pain (at the least) as the demand for office space slows.

Fortunately, the Vanguard Real Estate ETF (VNQ, $83.40) only invests 8% of the portfolio's $30 billion in assets in office REITs. The top three categories of REITs in VNQ are specialized REITs (42%), residential REITs (14%) and industrial REITs (11%). In total, Vanguard's ETF invests in 12 different real estate categories.

This is a top-heavy fund, however. Of its 183 holdings, the top 10 account for nearly 40% of the fund's assets. Those larger holdings include the likes of American Tower (AMT), Prologis (PLD) and Equinix (EQIX).

There are a few restrictions keeping VNQ from being too lopsided, however. The ETF tracks the performance of the MSCI US Investable Market Real Estate 25/50 Index, which keeps VNQ from investing more than 25% of its assets in a single stock. Further, the stocks weighted at more than 5% can't add up to more than 50% of the portfolio. This provides diversification while limiting the exposure to a single real estate investment.

As for the dividends? REITs are a traditionally income-friendly sector, and a down year for this high-yield ETF has brought the yield above 4%.

Learn more about VNQ at the Vanguard provider site.

• Type: Preferred stock
• Assets under management: $5.6 billion
• SEC yield: 5.3%*
• Expenses: 0.52%

Warren Buffett is one investor that isn't afraid to invest in preferred stocks. Even when it means he might have to wait for a return on his investment.

Preferred stocks are so called "stock-bond hybrids" that trade on exchanges like stocks, but deliver a set amount of income and trade around a par value like a bond. For instance: In 2019, Buffett invested $10 billion in Occidental Petroleum (OXY) preferred stock that paid Berkshire Hathaway (BRK.B) 8% in annual dividends. (Buffett also received warrants to buy 80 million shares of the oil and gas company at $62.50; unfortunately, falling oil and gas prices have put that investment into question.)

Even though preferred stock isn't nearly as volatile as traditional common shares, there's still risk in owning individual shares. A fund such as the Invesco Preferred ETF (PGX, $14.32) is an excellent way for investors to generate above-average income while maintaining a diversified portfolio of preferreds.

PGX tracks the performance of the ICE BofAML Core Plus Fixed Rate Preferred Securities Index, which invests at least 80% of its assets in fixed-rate U.S. dollar-denominated preferred securities. These securities have a minimum average credit rating of B3 (well into junk territory), but almost two-thirds of the portfolio is investment-grade. The portfolio is reconstituted and rebalanced on a monthly basis.

Invesco Preferred ETF's nearly 300 holdings are most heavily concentrated in financials (63%), followed by utilities (14%) and real estate (9%). Energy is 2% of the portfolio, but Occidental isn't included.

* SEC yield reflects the interest earned after deducting fund expenses for the most recent 30-day period and is a standard measure for bond and preferred-stock funds.

Learn more about PGX at the Invesco provider site

• Type: Large value
• Assets under management: $2.0 billion
• Dividend yield: 6.4%
• Expenses: 0.07%

The commission-free trading app Robinhood has gotten a lot of press recently for its account holders buying stocks either in or near bankruptcy – a quick way to make a bundle or lose your shirt. But Robinhood users also hold plenty of more stable investments, including ETFs.

The SPDR Portfolio S&P 500 High Dividend ETF (SPYD, $29.77) is held by 25,828 accounts, making it one of the most popular high-yield ETFs on the site and the 15th most-held ETF among Robinhood account holders as of this writing.

What makes SPYD special?

Cost is no doubt a factor. State Street charges a management expense ratio of just 0.07%, making it one of the 100 least expensive ETFs in the U.S. If fees matter, and they should, SPYD is an excellent possibility.

A second attractive feature of the ETF is that it tracks the performance of the S&P 500's 80 highest-yielding companies. If you're looking for income, capital appreciation, and relative safety, it's hard to beat SPYD.

The fund's tracking index is the S&P 500 High Dividend Index excludes any stocks under $8.2 billion in market value. Further, the weighted average market cap of the 64 holdings is $50.2 billion. Top holdings include the likes of Gilead Sciences (GILD), General Mills (GIS) and AbbVie (ABBV).

If you're interested in smaller companies, this isn't the ETF for you.

Learn more about SPYD at the SPDR provider site

• Type: Foreign Small/Mid Value
• Assets under management: $1.3 billion
• Dividend yield: 4.5%
• Expenses: 0.58%

The WisdomTree International SmallCap Dividend Fund (DLS, $57.00) is the third-largest of WisdomTree's 22 international ETFs with total assets of $1.3 billion. It tracks the performance of the WisdomTree International SmallCap Dividend Index, which consists of stocks with market caps in the bottom 25% of the WisdomTree International Equity Index, after removing the 300 largest companies.

Investors might shy away from this ETF because the roughly 900 components are based outside the U.S. and Canada. Further, some might consider it unusual to have a dividend focus when investing in smaller companies. However, WisdomTree has had great success over the years with international small caps.

"At WisdomTree, we believe that dividends provide an objective measure of a company's health and profitability – one that cannot be affected by accounting methods or government decisions," WisdomTree argues. "We have been weighting by dividends since WisdomTree launched its first ETFs in 2006."

The ETF's top three country allocations are Japan (34%), Australia (11%) and the United Kingdom (9%). The top three sectors are industrials (20%), financials (16%) and consumer discretionary (14%).

The top 10 holdings account for just 6.0% of the portfolio, and the average weighting is 0.11%, which are both great signs of diversification – something else you might consider important when investing in small-cap stocks.

Learn more about DLS at the WisdomTree provider site.

• Type: High-yield bond
• Assets under management: $5.3 billion
• SEC yield: 4.8%
• Expenses: 0.15%

The Xtrackers USD High Yield Corporate Bond ETF (HYLB, $47.82) is the only fixed-income fund in this list of high-yield ETFs, which makes sense given how low yields have been driven on many other types of bonds.

HYLB, which tracks the performance of the Solactive USD High Yield Corporates Total Market Index, has gathered $5.3 billion in total net assets – a good amount by broad ETF standards.

It's far smaller than some of the largest U.S.-listed fixed-income ETFs, such as the iShares Core U.S. Aggregate Bond ETF (AGG), which has more than $74 billion under management. However, when it comes to high-yield U.S. corporate bond ETFs, it is the fourth-largest out of 25 covered by ETF.com. More importantly, of the 25, it's tied for the highest FactSet rating at A-.

Why would someone want to own HYLB?

First, it has a relatively inexpensive management expense ratio of 0.15%, which gives investors a diversified portfolio of more than a thousand corporate bonds. It also yields 4.8%, which is excellent considering the Fed's benchmark rate is expected to be near 0% for at least the next couple of years.

Not only does it have a high rating from FactSet, but it also has a four-star rating from Morningstar based on its performance over the trailing three-year period. (HYLB listed in 2016.)

Lastly, most of the bonds are rated BB or B (the two highest tiers of junk) by the major credit rating agencies.

Learn more about HYLB at the DWS provider site.

Given that we're sitting in the 10th year of the longest economic expansion in American history, it is not surprising that we are subject to daily discourse between those who think we still have room to grow, and those who fear a contraction is imminent.

Commercial real estate (CRE) lives and dies with economic cycles, so many investors feel that they are unable to jump into CRE unless they have a bead on where the market is heading in the near term.

This task is even more challenging because of the constant chatter emanating from industry insiders, CEOs, financial analysts and anyone with something to say about the real estate markets. Frequently, market leaders will take diametrically opposed positions. As an individual investor, it can be difficult to understand what they see that you cannot.

We live in an information age, but access to information isn't enough. You must be able to mine that information for insights to generate better returns. Today, we'll help you figure out how to invest in CRE by showing you how to make sense of two opposing views in late-cycle commercial real estate investing. We'll also highlight a few real estate investment trusts (REITs) to home in on for growth and dividends.

Data is as of Jan. 22.

Multifamily REITs – which, despite their focus, are considered commercial real estate, not residential – share an industry, but not necessarily the same goals or strategies.

• Essex Property Trust (ESS, $309.85), a San Mateo, California-based REIT, is betting heavily on high-dollar markets on the coast.

Michael J. Schall, the current CEO and President of Essex, advocates a continued reliance on multifamily buildings in supply-constrained West Coast markets, despite high valuations and a harsh regulatory climate. That's particularly the case in Tier 1 cities such as San Francisco and Los Angeles, where land-use rules and tenant protections are some of the strictest in the country.

Eric Bolton, Jr., President, Chairman and CEO of Mid-America Apartment Communities (MAA, $134.93), is taking a different approach. Instead of focusing on Tier 1 cities in high-end markets, Mid-America is looking to lower-cost-of-living areas in the Southeast, Southwest and Mid-Atlantic regions. These regions tend to have lower acquisition costs, offer more favorable business climates, and have the most room to grow in the long run.

Both companies are betting big on the future of the American multifamily housing market, and that future remains favorable at least going into 2020, as Bolton remarked in this Nareit interview.

"We all have to recalibrate our thinking a little coming off the historically strong trends of the last few years, but overall I think the apartment business remains in very good shape," he says. "Demographics, social trends, employment conditions and reasonable new supply all combine to provide conditions for apartment leasing that will support steady rent growth."

However, both REITs have very different approaches to reaching long-term growth. ESS (yield: 2.5%) is betting big on the continued economic dominance of the West Coast, while MAA (yield: 3.0%) plans to grow through cheaper but more numerous acquisitions in the heartland and elsewhere.

Choosing the right market in which to invest seems like an insurmountable challenge, but there are tried-and-true metrics that investors can use to judge the multifamily market in any given geographic area.

The two key indicators you want to look out for are employment and population growth. The reason is simple: If people are unable to find jobs, they will be unable to afford housing. The same idea works for population growth: The fewer people you have competing for apartment space, the higher vacancies will be. Also, markets in areas with a declining population need to spend more on retaining tenants and marketing to new lessees.

Just remember: Even if these two indicators are solid, investors still must go deeper to find the true state of a market. For employment, ask yourself questions such as:

• What employers are working in the area?
• What are their long-term plans?
• Could they close or relocate?

All of these questions must be answered to determine the long-term health of a market. Markets that rely on one or two sources of employment, such as a major factory or a military post, tend to be more unstable than those areas with a more diverse employment base.

Going back to Essex Property Trust: ESS focuses strictly on multifamily properties in West Coast cities with strong employment growth, positive demographic trends and a multitude of demand drivers.

"Essex looks to invest in markets with the greatest long-term rent growth," Essex CEO Michael Schall told MultiHousingNews. "Each year, our research group looks more broadly at the housing supply/demand dynamics for many major U.S. metros, essentially to continually challenge our market selection criteria and portfolio allocations. At this point, on-going housing shortages, expensive housing alternatives and the exceptional growth in the technology industries continue to reaffirm our West Coast footprint."

Fundrise's West Coast eREIT (a public but non-traded REIT) is another option that follows a similar strategic plan.

Commercial real estate provides investors with stable cash flow, appreciation benefits and substantial tax advantages when compared to other popular asset classes.

CRE also can help protect investor portfolios from volatility in traditional equities. The counter-cyclical nature of real estate – and multifamily in particular – allows investors to hedge against drops in the stock market. Even during a major housing crash, like that in 2008, multifamily assets in many parts of the country retained the same level or reduced vacancy, primarily because of increased demand for rental housing as people lost their homes to foreclosure or financial circumstances.

Over the long term, the value of real property in the U.S. – including commercial buildings – has always gone up. Studies have shown that while the equities market and passive real estate investments reach the same level of growth, managed real estate assets (such as REITs) tend to slightly outperform the stock market in long-term growth.

The tax advantages of CRE assets often have substantial positive effects on investor portfolios. Programs such as Opportunity Zones and regulations such as 1031 Exchanges allow for reinvestment of capital that would have otherwise been paid to the IRS. The ability to reinvest that capital helps savvy investors generate higher returns compared to investments without a tax-deferral period.

An example of a public REIT that aims to generate returns via Opportunity Zones is Belpointe's OZ REIT (BELP, $100.10). However, it's worth noting that while it's a pioneer in the space, it's traded "over-the-counter" on very thin volume of a few thousand shares per day. Adoption, if it comes, will take time, and this certainly is a play for more aggressive tastes.

In the private space, SkyBridge Opportunity Zone REIT is attempting a similar strategy. Skybridge CEO Anthony Scaramucci explained to Bloomberg why his firm is getting into the OZ space:

"There are 8,700 opportunity zones throughout the U.S. and we wanted to offer our clients a diversified portfolio across a whole section of that market; we wanted to be able to provide income during the course of the 10 years as we develop and mature properties, which will be cash-flowing; and then the liquidity aspect where at the end of year six we will be able to take the REIT public and people can make a decision if they want to stay and/or sell their shares."

In many cases, investors feel they can create runaway profits by timing the market.

However, nothing is promised, and no outcome is certain. For instance, we are currently in the midst of a 10-year bull run that would have been inconceivable a decade ago, during the height of the Great Recession. Despite some negative indicators, such as the inverted yield curve that flashed a few times during 2019, many other positive indicators (such as job growth and consumer confidence) point to continued economic growth.

Many investors who waited on the sidelines in Year 7 or Year 8 are kicking themselves for mistiming. Their false belief that the market was overdue for a correction led to a situation where they lagged investors who pulled the trigger on investments regardless of historical trends.

That kind of timing isn't helpful. However, knowing where you are in the real estate cycle can help you locate profitable opportunities, and avoid losses. A focus on market fundamentals, and intrinsic value, is a much bigger factor in your long-term success than timing. It also is much easier to study the underlying fundamentals of an investment than to determine exactly when and how the market will go into recession.

"Investing is more an exercise in swinging a broadsword than using a surgical scalpel," says Charles Sizemore, principal of Sizemore Capital. "You don't have to time things perfectly so long as you're getting a reasonable price and, in the case of income-producing properties or REITs, getting a competitive yield. You should perhaps always keep a little dry powder around in order to take advantage of any major pullbacks. But if the numbers look good, you shouldn't be afraid to put your capital to work." He also points out that property rents tend to rise over time, and leases often have built-in rent escalators. So in the case of publicly traded REITs, this steady increase in rental income translates to steadily rising dividends.

Consider Realty Income (O, $76.89), which is probably the most "bond-like" of any traded equity REIT. Realty Income offers a decent current dividend yield of 3.6%, and it has raised that payout at a 4.6% compound annual rate since going public in 1994.

From the outside looking in, it can be puzzling to see two CEOs, of similar background and pedigree, advocating for wildly different approaches in the commercial real estate markets.

For instance, when it comes to REITs, an ideological battle is being waged between proponents of big-money capital raises, and those who believe these funds are too cumbersome to generate optimal returns. The difference of opinion boils down to the fact that some leaders believe that carefully deployed "smart money" will generate higher returns compared to large funds that use their substantial capital and position in the market to force yields, rather than picking and choosing the very best opportunities.

These differing belief systems lead individual CEOs to "steer the ship" in wildly different directions, but with the same goal: maximizing returns. A larger firm might try to corner a particular property market to drive economic development, while a smaller, more agile firm might pick and choose individual opportunities in high-growth areas across the country.

In the markets, nothing is guaranteed, so it should come as no surprise that even the most knowledgeable and capable leaders may have different takes on how to generate the best returns for investors from CRE.

As an example of a successful "small ball" approach, consider the case of STORE Capital (STOR, $38.31), which yields 3.7%. STORE has successfully built a portfolio of more than 2,400 properties composed of everything from dental offices to auto shops. A nice aspect of this strategy is that trouble in a single property won't upend the portfolio. It's also worth mentioning that, with its focus on service businesses, STORE's portfolio is about as close to "Amazon-proof" as you can get.

Retirees seeking yield and diversification are venturing into some murky waters. With valuations lofty and yields low in the traditional stock and bond markets, many older investors are casting about for alternative investments that can offer attractive distributions and low correlation with plain-vanilla investments. In some cases, they’re turning to “interval” funds, which offer access to more exotic, higher-yielding investments than those typically found in traditional mutual funds; non-traded real estate investment trusts, which often sport distributions of 6% or more and are not listed on an exchange; and private placements, which are unregistered securities offered privately to investors rather than sold in a public offering.

Sales of such holdings are soaring. Non-traded REITs are expected to raise $10 billion this year, more than double their 2018 sales, according to Robert A. Stanger & Co. Interval funds held nearly $30 billion in mid 2019, up 25% from a year earlier, according to Interval Fund Tracker, a website that follows the funds.

“We’re absolutely seeing more and more wealth-management clients allocate to alternative strategies” in search of yield, higher total returns and diversification, says Eric Mogelof, head of U.S. global wealth management at Pimco, which launched its first two interval funds in 2017 and 2019.

Such benefits, however, come at a cost. Compared with traditional investments, these holdings can have much higher fees and lower liquidity—meaning it may be difficult or impossible to get your money out when you want it. The investments can be complex and have varying levels of regulatory scrutiny. Interval funds, for example, are registered with the Securities and Exchange Commission and make public disclosures, but they can invest a substantial chunk of their assets in private offerings, which live in a less-regulated world where disclosure is limited and valuations can be difficult to determine.

The private securities market, where offerings are exempt from SEC registration, can also be a magnet for unscrupulous brokers who prey on older investors. Last year, unregistered securities were the top source of state securities regulators’ enforcement actions involving senior investors, according to the North American Securities Administrators Association.

As more exotic, higher-yielding holdings are pitched to mom and pop investors, regulators may add fuel to the fire. In June, the SEC requested public comment on whether it should consider changes that would make private offerings more broadly available to small investors. Currently, individuals investing in unregistered offerings must generally be “accredited”— meaning they have annual income over $200,000 or net worth over $1 million, excluding their primary residence. The SEC says its goal is to simplify and improve the rules for private offerings “to expand investment opportunities while maintaining appropriate investor protections” and promoting capital formation.

But some investor advocates say that expanding small investors’ access to unregistered securities could do more harm than good. In the private securities market, unlike the public markets, small investors “don’t get accurate information on which to value securities, and they’re not guaranteed the best available price,” says Barbara Roper, director of investor protection for the Consumer Federation of America. “The deck is stacked against them.”

Investors considering a foray into less-liquid, more-complex holdings need to scrutinize these investments’ fees, withdrawal restrictions, valuations, volatility and other risks. Here’s a field guide to the wilder side of retirement investing.

Interval Funds. An interval fund is a type of closed-end fund—a fund that has a fixed number of shares. But unlike most closed-end funds, interval funds generally don’t trade on an exchange. Instead, the funds offer to repurchase shares at set intervals, typically once per quarter.

These repurchase offers can range from 5% to 25% of shares outstanding. So unlike traditional mutual fund investors, who generally can sell all their shares at any time, interval fund investors have to wait for a repurchase window and hope that the repurchase offer is large enough to satisfy their redemption request. That limited liquidity gives the funds leeway to invest in higher-yielding, less-liquid assets. Holdings can include farmland and other real estate, private equity, catastrophe bonds and direct lending—providing loans directly to borrowers, without an intermediary.

Interval funds aren’t subject to the liquidity rules governing traditional mutual funds, which can’t invest more than 15% of assets in illiquid securities. And sacrificing liquidity is one of the best ways to juice returns in today’s market, interval fund managers say. “One of the most attractive premiums in the market is the illiquidity premium—the premium you get by investing in private markets versus public markets,” Mogelof says.

The Pimco Flexible Credit Income fund, for example, had nearly 30% of assets in private holdings at the end of September and offered an 8.24% distribution rate. Early this year, Pimco launched its second interval fund, Flexible Municipal Income, which can invest in muni private placements and offered a 3.35% distribution rate at the end of September.

Some advisers say credit-focused interval funds can be a good solution for more-sophisticated, income-seeking investors. “For the appropriate clients who understand the liquidity and structure, we think it makes a lot of sense,” says Dick Pfister, chief executive officer of AlphaCore Capital, in San Diego. These funds “have become more in vogue with where interest rates are,” he says. “People still need income.”

But many credit-focused interval funds are relatively new and untested in times of severe market stress, and some analysts are concerned about how they’ll hold up amid market turmoil. Although the limited repurchase windows shield fund managers from having to sell significant assets at depressed prices to meet investor redemptions, even quarterly liquidity “is going to be insufficient if you run into a severe market dislocation or period of heightened risk aversion,” says Stephen Tu, senior credit officer at Moody’s. If you want to get a sense of how these funds will fare in a market slide, he says, look at hedge funds that pursued similar credit strategies during the financial crisis. In many cases, he says, those funds were unable to meet redemption requests and put up gates limiting investor withdrawals.

Even in these relatively benign markets, some interval-fund repurchase offers have been oversubscribed. The Stone Ridge Reinsurance Risk Premium interval fund, for example, received redemption requests that were larger than its repurchase offers in several quarters over the past couple of years, and the fund repurchased additional shares to accommodate shareholders’ requests, according to fund documents. The fund, which invests in catastrophe bonds and other reinsurance-related securities, lost 9.6% in the six months ending April 30. Stone Ridge did not respond to requests for comment.

Generally, if a repurchase window is oversubscribed, interval-fund investors may receive only a pro rata portion of the redemption they requested. Investors should know that “it could take a few quarters to exit” a fund, says Jacob Mohs, owner of the Interval Fund Tracker site.

Other risks to consider: The funds can employ leverage, or borrowed money, which can increase volatility. In times of stress, a leveraged fund could be forced to repay loans on an accelerated basis, says Rory Callagy, senior vice president at Moody’s. The funds’ fees can be high, often topping 3% annually. And the enticing distributions aren’t necessarily just interest and capital gains—they can also include “return of capital,” which means the fund is handing back a portion of your investment. “You want to look at total return over the longer term,” Mohs says. “You don’t want to be sucked in by a headline yield.”

Even the funds’ fans say that allocations to interval funds should be limited. “A client having a large chunk of their net worth in interval funds is probably not suitable,” Pfister says.

Non-Traded REITs. Like publicly traded REITs, non-traded REITs hold portfolios of commercial property and other real estate and distribute most of their taxable income to shareholders in the form of dividends. But unlike publicly traded REITs, non-traded REITs are not listed on an exchange. Investors buy the shares through brokers.

Early this decade, non-traded REITs gained notoriety for their hefty commissions, lack of liquidity and regulatory troubles. Although they’ve become more investor-friendly in recent years, they still come with potential pitfalls.

Commissions have come down, but they can still be hefty. Typically, total commissions add up to about 8.5%, although there are some no-load non-traded REITs available, says Kevin Gannon, chief executive officer of Robert A. Stanger & Co. Non-traded REITs may also charge a performance-based fee, which is often about 12.5% of the total return above a certain threshold, such as 5%, Gannon says. That fee structure “clearly aligns the performance and experience of the retail investor with the asset manager,” says Anthony Chereso, president and chief executive officer of the Institute for Portfolio Alternatives, an industry group whose members include REIT sponsors.

But some advisers are skeptical that these vehicles are worth the cost of admission. “Usually you can get the exposure you want for a lower cost” in a listed vehicle, Pfister says.

Liquidity has also improved, but it’s still limited. Traditionally, redeeming non-traded REIT shares before the REIT listed on an exchange or liquidated assets could be difficult and expensive. Now, many non-traded REITs offer to repurchase shares monthly or quarterly at net asset value. These repurchase offers are generally capped at 20% of shares outstanding annually. To meet regular redemptions, these REITs tend to keep a chunk of their assets in cash and other lower-yielding, more-liquid holdings—which can put a drag on returns. Listed REITs, by contrast, can be traded on an exchange at any time and don’t need this liquidity buffer.

Income-focused investors may easily be tempted by the yields, which are often 5.5% or more, versus less than 4% for a typical listed REIT. But over the long haul, non-traded REITs have lagged behind their listed cousins. Only one out of four non-traded REITs tracked between 1990 and mid 2018 have outperformed listed REITs over their lifespan, according to a Cohen & Steers report.

Some retirees who have dabbled in non-traded REITs say “never again.” Nancy Hanson invested about 8% of her portfolio in a non-traded REIT in 2016 because her financial adviser said it was a good way to diversify. “Our portfolio was in his hands, and we were just trusting he was doing right by us,” says Hanson, 54, a Silicon Valley retiree. But she regretted the investment almost immediately. She didn’t understand how a non-traded REIT worked, she says, and she felt uneasy about its valuation because it didn’t trade on an exchange. She held on—because getting out early would have meant a significant haircut—but she ditched her financial adviser and shifted to a far simpler and cheaper investment approach. Today, her portfolio consists mainly of four low-cost Vanguard index funds, and her strategy, she says, is to “sit back and let it do its thing.”

Private Placements. Many retirees, having accumulated a lifetime of savings in IRAs or 401(k)s, easily clear the income or net worth hurdles to qualify as accredited investors. That means they have access to private placements, which are exempt from registration with the SEC and are often pitched to seniors as income-producing vehicles. But all too often, investor advocates say, these retirees get entangled in a web of poor disclosure and unscrupulous sales practices.

Private placements issued by New York–based GPB Capital, for example, have recently become the focus of multiple regulatory investigations and investor complaints. Last year, after the firm missed a deadline for filing audited financial statements for GPB Automotive and GPB Holdings II, the Massachusetts Securities Division launched an investigation into the sales practices and due diligence of firms selling the products. “I’ve seen this movie before, and it does not end well,” says Joe Peiffer, managing partner at law firm Peiffer Wolf Carr & Kane. Peiffer represents multiple retirees who have filed arbitration complaints against brokerage firms that sold the GPB private placements, alleging the investments were unsuitable for them. “These are not actions against GPB Capital, but against broker dealers who are unrelated to GPB Capital,” GPB said in a statement.

The GPB saga also underscores the risks of interval funds investing in private placements. As of June 30, interval fund Wildermuth Endowment had an investment in GPB Automotive Portfolio LP, which it purchased at a cost of $500,000 and listed at a fair value of just over $457,000. The holding represented less than 0.3% of fund assets at the end of June. Yet GPB has been a challenging issue for Wildermuth, because of the difficulty of valuing an investment that is not able to provide financials, says Daniel Wildermuth, the fund’s manager. The fund’s current valuation of the investment, he says, is based on what Wildermuth believes to be the most up-to-date information.

GPB said in a statement that “further information with regard to company level financial performance will be provided upon the completion and issuance of the outstanding company audits” and registration filings for the applicable partnerships.

On top of the sometimes fuzzy valuations, private placements sold to small investors also tend to come with high commissions and can be tough to sell.

If an adviser pitches you unregistered investments, check on his regulatory track record. Go to brokercheck.finra.org for details on how long a broker has been in business, what licenses he holds and his regulatory history. Search for investment advisers, who are held to a fiduciary standard, at adviserinfo.sec.gov. The adviser’s Form ADV includes details on fees and any regulatory problems.

Also ask the adviser directly what compensation he—and his firm—might receive as part of the transaction. “Anybody not willing to tell you how much they get paid is not someone you want to do business with,” Peiffer says.

If this is money you can’t afford to lose, or you can’t get satisfactory answers to your questions, “the answer is just stay away,” Roper says. “There are lots of good investments available in the public markets to serve pretty much any investment goal you might have.”

Ryan Ermey: Where should you invest in 2020? We don't have an exact answer, of course, but we do have Kiplinger's executive editor Anne Smith, who joins the show to talk about market moving trends for the upcoming year in our main segment. On today's show, Sandy and I discuss strategies to dissuade porch pirates and a new edition of wild pitches covers shopping for car insurance and investing in real estate. That's all ahead on this episode of Your Money's Worth. Stick around.

• Episode Length: 00:29:44
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Ryan Ermey: Welcome to Your Money's Worth. I'm Kiplinger's associate editor Ryan Ermey, joined as always by senior editor Sandy Block. Sandy, how are you?

Sandy Block: I'm great, Ryan. How are you?

Ryan Ermey: I'm doing good. It is shipping season, as we've mentioned before on this show. I'm trying to get gifts together for everyone in my family. There's always a debate as to whether I should ship them directly to the people who are receiving them and text them, "Don't open this," or if I should send them to myself and wrap them and everything at home. Always a dilemma, but no matter where I am shipping them, actually it's not really no matter where, my parents live in a lovely suburb, I do not, and so when things get shipped to my house and they're left on the front stoop, a lot of times, especially if it's a big, nice-looking package, people just go ahead and help themselves to it.

Sandy Block: If it says fragile on it, you're in trouble.

Ryan Ermey: Yeah, exactly...

Sandy Block: Electronics inside.

Ryan Ermey: It must be Italian. We have some strategies to stop so-called porch pirates.

Sandy Block: Right. Even in lovely suburbs, Ryan, this has become a real problem because I think there's some people out there who are just like following the Amazon truck to see where it goes.

Ryan Ermey: Right.

Sandy Block: It's an easy crime. You swipe and off you go. We've got several suggestions of ways to sort of thwart these people. One is just don't have the stuff sent to your house at all.

Ryan Ermey: Right.

Sandy Block: You can have it sent to your job, or several of the big companies such as Amazon will let you set up a locker where you can have your things sent and just go pick it up there so it is automatically locked away and you don't have to worry about that. You just... I mean, you've got a little inconvenience in that you have to go get it, but you have this peace of mind of knowing that your stuff isn't sitting out there for somebody to swipe.

Ryan Ermey: Yeah. UPS and FedEx both have services like these. They have areas or lockers where you can go pick things up. You'll have to register for a UPS My Choice or FedEx Delivery Manager account. Both of those are free to be done online, to register, I mean. You can ask to have purchases delivered to one of their participating retailers. UPS doesn't charge for the service. FedEx may charge up to $15 to deliver to a different address. See who is handling your shipments. Amazon provides lockers in Whole Foods markets and convenience stores, and you can select lockers near your address for delivery when you're checking out at Amazon. Another thing that we've talked about on this show before was the USPS Informed Delivery service. You had covered that at the time, right Sandy?

Sandy Block: Right. We talked about... actually a little caution about this because this can be a useful service when you sign up. The United States Postal Service will email you scanned images of unopened letters and they'll also let you see the delivery status of a package, provide delivery instructions and set up a redelivery. One of the concerns about this is that anybody could sign up as you for this and have all your stuff delivered to them.

Ryan Ermey: Right.

Sandy Block: You might want to go ahead and just sign up for this, it's free, just to prevent someone else from doing it. A kind of less complicated work around that I've used is just whenever you order, sign up for track your package. Amazon, just about anybody you order from will let you track your package. If you actually do that and take the effort to do it, you at least will know if something didn't show up when it should have. It's not going to necessarily thwart these, but it would alert you when to be watching for something and maybe have somebody home or something like that.

Ryan Ermey: Right. If that's the case, if something does end up being declared lost or undelivered, your best bet is to contact the carrier, contact the merchant, figure out who is responsible and then you can figure out your refund. Then the last thing to mention, and there's plenty of commercials going around about this around this time of year, is that there are WiFi video doorbells available. Ring, I believe, tends to be the popular, well-known one. It works with your Echo Show if you have one of those, and just like an Alexa device that has the video screen on it. When placed within the range of your home's WiFi network, one of these video doorbells will monitor the door, detect motion, alert you to visitors. If someone triggers your motion detector up there, you can get a video feed to your smartphone, your tablet, your computer, your aforementioned Echo. Then you say, "Hey Alexa, go ahead and shoot the guy at the door." No. That's not allowed.

Sandy Block: Well, actually another thing you might want to consider is just putting up, even if you don't have this, is putting up a sign that says you do, "Under video surveillance."

Ryan Ermey: Right.

Sandy Block: When I was researching this, I saw that you can actually buy fake cameras to put in front of your house.

Ryan Ermey: Yeah, why not?

Sandy Block: Because one of the downsides to some of these technologies is you might see somebody grab the package and run away, but you're not home. What are you going to do about it?

Ryan Ermey: Right.

Sandy Block: But maybe you want to sort of alert the potential porch pirates that they are being watched and-

Ryan Ermey: You could talk to them too through the thing.

Sandy Block: Yeah, say, "Get out of here."

Ryan Ermey: "Hey, scram." Yeah, you can't actually set the dogs on them or have them shot or anything, but you can see, maybe get a good look at their face or whatever, give a little help to the police.

Sandy Block: That's right.

Ryan Ermey: But either way, really the best practice is just try to make sure that you can get it sent someplace where you can get your hands on it quickly. We actually do have some coverage of this on Kiplinger.com, so we will be putting all of that up in the show notes for you. Happy holidays to everyone tracking down all of their packages. Coming up, Anne Smith gives her investing outlook for 2020. Don't go anywhere.

Ryan Ermey: Alright, we are back and we're here with Anne Smith. She is the executive editor of Kiplinger's Personal Finance and also my boss in the investing section. Anne, thank you so much for coming on.

Anne Smith: It's my pleasure, Ryan.

Ryan Ermey: We're talking about the cover story for the January issue. It is the investing outlook for 2020. The current bull market for stocks is now in its 11th year, but you say in this story that it's been less like a charging bull and more like our friend Ferdinand the bull from the children's books. What do you mean by that?

Anne Smith: Well, I didn't... I wasn't talking about the entire bull market, just the most recent year or two.

Ryan Ermey: Right. Yeah, fair enough.

Anne Smith: What I meant was that, ironically, the market has advanced incredibly strongly in a super cautious environment. Money has flowed out of stock funds and into bond funds all year. The parts of the market that did best were the ones that we call defensive. That's think utilities, for example, the kinds of stocks that do best in downturns instead of raging bull markets. Others in that group, big U.S. blue chips, low volatility stocks have been huge performers for the last couple of years. Those are almost bear market investments. It's been this incredible bull market led by bears, so a little timid like Ferdinand.

Ryan Ermey: Fair enough.

Sandy Block: Given that, what are our expectations for the market in 2020? I think a lot of people are still nervous because we have such a prolonged bull market. How should people be positioning their portfolios, especially if they're worried about risk?

Anne Smith: Well, we think that the market gets a little breath of new life in 2020. I think last year, recession fears dominated, and for the time being, not forever, they seem to have blown over for a little bit, at least. The dreaded inverted yield curve that such a recession harbinger is inverted again. That means that longterm rates are again yielding more than short term rates. The Federal Reserve has gone from tightening to cutting rates, and we think there's at least one more rate cut ahead in 2020. There's a huge amount of fiscal and monetary stimulus working itself through the economy, and not just here but overseas as well. U.S. corporate earnings, which are the most important thing, totally flat-lined in 2019 and are picking up again in 2020, not as much as Wall Street analysts expect. We think about half as much as they expect, but still picking up from kind of a trough. That's kind of a mini reset for the market.

Ryan Ermey: I mean, the big thing that's impossible to ignore when you're looking out and thinking about forecasting for 2020 is the inquiries over impeachment and of course the upcoming elections. What should investors make of what's going on in Washington?

Anne Smith: Well, before we get into that, let me just say what our forecast for 2020 is.

Ryan Ermey: Well, yeah, just in case.

Anne Smith: We think the market can... when I say the market, I mean the S&P 500, which is a broad market barometer, but also I'll caution you, it's a big stock barometer.

Ryan Ermey: Right.

Anne Smith: I see a little more opportunity for small stocks and foreign stocks and some other benchmarks this year that you might want to measure yourself against.

Ryan Ermey: Corners of the market, yeah.

Anne Smith: But we think the S&P can reach 3,200 to 3,300. That's a range of 5% to 7%, and then you add in two percentage points of dividends and you're up to a total return of 7% to 9%.

Ryan Ermey: Alright. Back to my brilliant politics question, now that we've gotten that out of the way.

Anne Smith: It's only the most important question this year. In fact, I feel like saying our forecast is good to mid year or late summer, early fall, longest, and then it's an unknown.

Ryan Ermey: Right.

Anne Smith: Especially now. You asked about impeachment.

Ryan Ermey: That's the most immediate thing on people's minds, I would say.

Anne Smith: That's the most immediate thing, but it doesn't seem to be a worry to anybody on Wall Street, at least right now.

Ryan Ermey: Well, that's good.

Anne Smith: That's because they don't believe the president is going to be removed. The impeachment seems to be kind of more political theater and a sort of market neutral event as it stands now.

Sandy Block: Impeachment may be a nonevent for the markets, but we've got a big election coming up in 2020. What does Wall Street think about that?

Anne Smith: Elections are huge. We just don't know...

Sandy Block: Who's going to win?

Anne Smith: Yeah, we don't know who's going to win, and therefore what the impact will be. It's a huge amount of uncertainty. That's why, even though we're talking about this mini reset and new life for the market, it's still going to be lots of uncertainty, which equals lots of volatility. It's a late stage bull market anyway, notoriously volatile, and the election could throw everything into a tizzy. A lot depends on who the democratic nominee will be. We just don't know what that'll be.

Sandy Block: Right.

Anne Smith: We learned in the last election that projections are notoriously difficult, but there's a couple of things that you can bear in mind. For instance, healthcare stocks are perennial under-performers in election years. That's doubly so this year because our entire insurance, our medical insurance system and drug pricing, those companies are under the microscope. Other things that you want to keep an eye on as the election unfolds and we know more about who the democratic nominee will be, financials, energy stocks, big tech...

Ryan Ermey: Yeah, all industries that have come under some amount of scrutiny depending on who the candidate is.

Anne Smith: Correct. Those you want to keep an eye on.

Ryan Ermey: Getting back towards some meat and potatoes stock talk here, value-oriented stocks have trailed so-called growth stocks, faster growing stocks, for really a long time until very recently, when it appears that value might be getting off the mat a little bit here. Do we think that things are looking up for value stocks in 2020?

Anne Smith: We do, although you know better than anybody else, having written about value stocks a year ago...

Ryan Ermey: For a couple years now, yeah.

Anne Smith: ...that sometimes they get off the mat and then fall right back down.

Ryan Ermey: Right.

Anne Smith: But the thing about value stocks in 2020 is that they overlap with so-called cyclical stocks.

Ryan Ermey: Right.

Anne Smith: A lot of people are very high on cyclical stocks on Wall Street. These are stocks that are sensitive to the economy. Think industrial stocks, financial stocks and stocks that make consumer goods that are non-necessities.

Ryan Ermey: Sure.

Anne Smith: Those stocks have been strong all along because the consumer has been super strong and remains so because unemployment is at decades-long lows.

Ryan Ermey: Right.

Anne Smith: If the economy bulls are right and the manufacturing sector is troughing now and picking up a little bit from a lot of its trade-related malaise and earnings pick up and we get this little economic reset, then the cyclical sectors should do well. They overlap with value sectors a lot, with value stocks.

Ryan Ermey: Gotcha.

Sandy Block: What's even harder than writing about value stocks is writing about overseas stocks, because they've been so volatile and down for a long time, but we know that we are not the center of the universe. Should investors be dipping their toes in international waters this year?

Anne Smith: I think yes. Emerging markets have done pretty well of late. They've had a little bounce. A lot of people, as I reported this story, recommended not only emerging market stocks, but emerging market debt. Again, if the global economy is picking up, then we'll see that the most in emerging markets and also in Europe. Another way to think about it is we've been in this huge, long bull market in the U.S., and chances are your portfolio might be a little tilted maybe a little too much toward the US. You need to rebalance a little bit and keep some international in there.

Ryan Ermey: Just given what we're looking at for the year and we'll let you get back to work, we know that you're very busy, what is the sort of broad advice if someone were to take one thing away from the conversation that we've had? Where should people be? How should people be situating their portfolios now?

Anne Smith: Well, Ryan, that's really hard because everybody is an individual with an individual circumstance. If you're in or close to retirement, I think you stay cautious. When we say consider these cyclical sectors, these are often what people put in the offense category versus the defensive stocks that we talked about earlier.

Ryan Ermey: Off the bat, yeah.

Anne Smith: We do think that people ought to get a little offensive here, but that's because they've been so defensive. Again, it's a matter of balance.

Ryan Ermey: Yes.

Anne Smith: You probably have to shift back a little bit, but that doesn't mean sell all of your defensive holdings. It means cut back a little bit and shift into things, financials, industrials, consumer discretionary stocks that maybe you were underweight last year.

Ryan Ermey: Alright, well there you have it. Anne, we want to thank you again for coming on. Be sure to check out the entire 2020 outlook cover package in the January issue of Kiplinger's Personal Finance. We have Anne's eight trends to be on the lookout for in 2020. We also have the 10 best stocks of the last decade, the 10 stocks for the next decade, which we will be discussing very soon on this show, so be sure to check it out on newsstands very soon. Anne, thank you again for coming on.

Anne Smith: My pleasure.

Ryan Ermey: When some survey respondents are opting to slam their hands in a car door, you know it's time for wild pitches. Stay tuned.

Ryan Ermey: We are back. Before we go, it's Sandy and mine's favorite segment, wild pitches. Sandy, what is your wild pitch this week?

Sandy Block: You know, I don't know if it's the holidays or what, Ryan, but it seems like the wild pitches have become fast and furious lately, but this one really rises above the rest. It falls into a category you've created called surveys of dubious provenance.

Ryan Ermey: Yes, indeed.

Sandy Block: Alright. This one doesn't even fall into the dubious category. I just don't believe it. It says a study reveals one in five consumers... I get this out. One in five consumers prefer to slam their hand in a car door than shop...

Ryan Ermey: Rather than...

Sandy Block: Rather than shop... one in five...

Ryan Ermey: We should leave it in.

Sandy Block: No. I've got to get this out. One in five consumers prefer to slam their hand in a car door than shop for car insurance.

Ryan Ermey: Right.

Sandy Block: Now, have you ever slammed your hand in a car door?

Ryan Ermey: Yeah. It's miserable.

Sandy Block: It's horrible. Not only is that a ridiculous question, I'd love to know how they phrased it.

Ryan Ermey: Right.

Sandy Block: It's not that hard to shop for car insurance. We will put some things in the show notes because we've written a fair amount about this. The great thing about shopping for car insurance is you very well could save some money, which is a whole lot nicer than slamming your hand in a car door. You'll feel good. You won't feel bad. Some of our tips are look at what you have now and if your situation has changed, maybe you're not driving as much, you have a college kid who's-

Ryan Ermey: I was going to say, kid went off to college is a classic one.

Sandy Block: There's all kinds of discounts. The car insurance business is very competitive. You can go online and get quotes, which is not painful. You can hire an insurance agent to help you find a good deal, which is not painful. Yeah, it might take a little bit of time and maybe there's something else that you'd rather do, but I'm pretty sure that slamming your fingers in a car door is not something that you would rather do than shop for car insurance. I don't know. Like I said, I'd love to know how they phrased this question, but I'm just... I am not buying it.

Ryan Ermey: Yeah. I got my fingers in the sliding door of a '96 Toyota Sienna, I believe.

Sandy Block: Ugh, no.

Ryan Ermey: Yeah. I mean, hurts for a long, long-time.

Sandy Block: Yeah, exactly. Exactly. Sorry, people. I know there must be a PR manual out there that says, "This is how you get clicks," but this ... just jump the shark on this, folks. What do you got Ryan?

Ryan Ermey: Well, every once in a while a wild pitch comes through the inbox that you know it's going to be good just from the subject line. This one is, "This REIT is recession-proof."

Sandy Block: Ooh, I'm in.

Ryan Ermey: Yeah, right. Perfect. I'll write about it. Sign me up. It's, "Hi, Ryan. Purchasing farmland outright usually costs millions of dollars so it's not realistic for the average investor, but real estate investment trusts," that's what REIT stands for in our subject line there, "are making farmland more affordable than ever. By buying just one REIT share, you can own a piece of one of the lowest risk, high reward assets out there and it's a pretty solid investment too." First recession-proof, but now pretty solid. "It's a pretty solid investment too. Farmland typically outperforms the NASDAQ and S&P 500," I don't know about that, "and it is nearly recession-proof due to its stability (people have to eat.) Are you interested in learning more?"

Sandy Block: No.

Ryan Ermey: No, I'm not. No single REIT, or any single stock really, is recession-proof. Not that I even really know what that means. When we talk about good investments during down markets or accompanying recessions, we typically mean things that will hold up better than the broad market, but these things are still going down. When everything is going down, you're just trying to lose less. Very few things are recession-proof. Some are a little bit more recession-resistant, but I guess it presents a decent opportunity to talk about REITs and what they are. For the uninitiated, real estate investment trusts are companies that invest in all sorts of properties. They don't have to be farmland. It could be shopping malls, office buildings, apartments, data centers. They earn money.

Ryan Ermey: For instance, in the case of shopping malls, they earn money from the rent that stores pay to be in the shopping mall. So far this year, REITs have been just about right in line with the S&P 500. They've done quite well. The most prominent REIT index returned 25.8% through yesterday's close, we're recording here in the middle of the week, pretty much right in line with the S&P 500, which returned 26.3%, but people ordinarily don't invest in REITs to beat the stock market. They invest in them for income. By law, REITs must pay about 90% of their net earnings as dividends. That same FTSE index yields about 3.5% on average, compared with 1.8% for the 10 year treasury note and 2% for the S&P 500. Generally, when the yields of bonds and stocks are low, REITs become more popular with investors because they're a place to get yield, but as with any stock, and this is where this pitch it's kind of crazy, you really shouldn't be touting just one as a way, especially as a way to protect against downside.

Sandy Block: Right. I don't know a whole lot about REITs, but I know a little bit about farming. To suggest that it is a risk or even low risk proposition tells me that they don't know very much about farming. Farmers are having a terrible year this year. Many of them suffered massive flooding through the Midwest. They've been kicked hard by tariffs. They go bankrupt all the time. Interest rates can kill them. There's all kinds of things. Yes, everybody has to eat, but farming is very competitive. Food comes from all around the world.

Ryan Ermey: Right.

Sandy Block: To somehow suggest that because we all have to eat that you can't lose money in farming reminds me of an old joke, how do you make $1 million in farming? You buy a farm for $2 million.

Ryan Ermey: Right. How do you end up with a million?

Sandy Block: That's right. It's dubious on that account, and also just the whole premise of how it works.

Ryan Ermey: Investing in real estate in general is considered a good diversifier because while REITs are still stocks, they don't always move in the same direction as the broad stock market because there are different forces at play when it comes to the real estate market. The above average yield does give you a little bit of ballast when stocks go down, but buying any one stock is always going to come with risk.

Ryan Ermey: If you're interested in getting into REITs, and maybe we'll have someone on here at some point to talk about more specific individual names and why we like them, consider a broadly diversified real estate ETF. Vanguard has a good one. The Vanguard real estate ETF, the symbol is VNQ, low cost way to get broad exposure to the whole sector. If you want to read a little bit about some of our coverage of individual REITs, we do have a story that we'll put in the show notes, 10 REITs to buy for 2020. Be on the lookout for that, but yeah, in general folks, we don't want to be recommending individual farming real estate investment trusts as a way to stave off recession. It's not how we do it around here.

Ryan Ermey: That'll do it for this episode of Your Money's Worth. For show notes and more great Kiplinger content on the topics we discussed on today's show, visit Kiplinger.com/links/podcasts. You can stay connected with us on Twitter, Facebook or by emailing us at podcast@kiplinger.com. If you liked the show, please remember to rate, review and subscribe to Your Money's Worth wherever you get your podcasts. Thanks for listening.

Links and resources mentioned in this episode

• ID Thieves Exploit Snail Mail
• How to Protect Your Online Purchases
• Put Smart Home Technologies to Work for You
• Where to Invest in 2020
• Expect a Year of Moderate Gains Strategist Says
• 6 Steps to Cut Your Car Insurance Rates
• 10 Best REITs for 2020

If you're lucky enough to see the Kentucky Derby – standing-room tickets for May's 146th running recently sold for $89 online – you can wager a few bucks and perhaps take away a small profit for your memories. But it's possible to play the Derby another way: as a shareholder. Had you wagered $1,000 a year ago on the owner of Churchill Downs, you'd have $1,487, for a return of nearly 49%. Not bad.

You also can own a piece of the storied Empire State Building, deemed one of the Seven Wonders of the Modern World by the American Society of Civil Engineers, which includes marvels such as the Golden Gate Bridge, the Panama Canal and the Chunnel from England to France. Maybe country music’s hallowed Grand Ole Opry strikes a chord. Or what about the world's most popular sports franchise?

For investors with a yen for a little history along with their returns, we've put together a list of investible famous landmarks and the nine publicly traded companies that own them. Overall, the bull market has been so grand for property and entertainment investors that if the stock collection below were an equal-weighted portfolio, it would have a one-year return of 20.9% and a five-year gain of 85.1%.

Not all of our picks have been big winners of late – some are being refurbished as landmarks and as investments, and might be more suited to bargain hunters comfortable with turnarounds. But all of these stocks will give you some bragging rights when you visit the landmark in question.

Data is as of Nov. 28. Stocks listed in alphabetical order.

• Owner: Churchill Downs Inc.
• Market value: $5.3 billion
• Dividend yield: 0.4%
• 1-year return: 48.7%
• 5-year return: 328.0%

The Kentucky Derby draws big crowds, with some visitors paying not $89 for standing-room only, but $5,000 or so for package deals to party all week and watch the two-minute race from the grandstand.

• Churchill Downs Inc. (CHDN, $132.39) actually deeded the Churchill Downs racetrack to the city of Louisville in exchange for some help in developing amenities and expanding capacity, but it has the right to buy the track from the city for $1.

What's important to the bottom line is the cash flow from the events. Churchill Downs also owns trademarks and other racetracks and casinos, and it's big in online betting. The combined enterprise in 2018 cleared a little more than $350 million in profits on $1 billion of revenue – a margin befitting a biotech winner rather than a sporting venture.

• Owner: Empire State Realty Trust
• Market value: $5.0 billion
• Dividend yield: 3.0%
• 1-year return: -8.6%
• 5-year return: -7.4%

You can pay a tourist's $38 or a prince's $93 to ascend the Empire State Building, depending whether you get in line to ride to the outdoor deck on the 86th floor or take the VIP express to the new glammed-up, glass-enclosed 102th floor aerie.

• Empire State Realty Trust (ESRT, $13.93) collects $125 million a year from lift tickets purchased by visitors. Alas, Manhattan office space is in a rare tailspin, and the Empire State Building still needs renovating to attract higher-grade corporate tenants. As a result, ESRT shares languish 37% below the value of the assets owned by the trust (including other New York City properties). That's a massive discount, and it proves there's no guarantee that just because a landmark is famous or beloved the capital markets will attribute extra value to its owner.

Empire State Realty is slowly adding new and better tenants to the tower, however, and expects to close the gap between its rents and the average for Manhattan.

• Owner: Norfolk Southern
• Market value: $51.0 billion
• Dividend yield: 1.9%
• 1-year return: 22.6%
• 5-year return: 87.2%

If you've seen photos of a train bent so sharply so that riders in the front cars can see those in the rear, you probably were looking at this remarkable trackage in central Pennsylvania. As legend has it, Horseshoe Curve was high on the Nazis' list of U.S. targets to sabotage.

• Norfolk Southern (NSC, $195.74) is successor to the curve's original owner, the Pennsylvania Railroad, and has been a splendid long-term investment. As of October 2019, the company had declared a stock dividend for 149 consecutive quarters.

• Owner: Manchester United plc
• Market value: $3.1 billion
• Dividend yield: 1.0%
• 1-year return: -2.4%
• 5-year return: 16.9%

The history of public shareholders in big league sports is both limited and uninspiring. The Green Bay Packers have non-tradeable shares with no market value that technically represent equity in the team but realistically are just certificates to frame. Way back when, industrial companies sometimes owned ballclubs to help market products; Anheuser-Busch (BUD) once ran the St. Louis Cardinals. However, today, the financial value of sports teams tilts toward product licensing and real estate.

• Manchester United plc (MANU, $18.62), which owns the world's most popular sports team (for instance, its social media following is six times that of the New York Yankees) and its hallowed turf, sweeps in far more from merchandise and sponsorships than from ticket sales. The company's American owners control most of the shares, but the rest trades and pays a small dividend.

• Owner: Ryman Hospitality Properties
• Market value: $4.7 billion
• Dividend yield: 3.9%
• 1-year return: 27.0%
• 5-year return: 162.2%

Hotel and entertainment REIT Ryman Hospitality Properties (RHP, $91.49) changed its name from Gaylord Hotels after it restored the Grand Ole Opry's original home in downtown Nashville.

The Ryman Auditorium's history dates all the way back to 1892, but it is now a state-of-the art theater and concert venue that attracts premier country acts such as Vince Gill and Amy Grant, as well as the Moscow Ballet and Elvis Costello. It alternates Grand Ole Opry shows with the Opry's permanent location at Opryland, outside the city.

RHP also owns resorts/convention centers in locations such as Kissimmee, Florida, and National Harbor, Maryland, near the District of Columbia.

• Owner: Boston Properties
• Market value: $21.5 billion
• Dividend yield: 2.7%
• 1-year return: 12.7%
• 5-year return: 27.0%

Salesforce Tower is the tallest building in the western United States and one of many impressive structures owned by Boston Properties (BXP, $139.01), the biggest office real estate investment trust (REIT) by total market value. The portfolio consists of 196 properties in core markets that include the District of Columbia, New York City, Boston and San Francisco.

BXP has $2.4 billion of property in development scheduled to come online between late 2020 and 2022, 83% of which is pre-leased to high-quality tenants.

• Owner: Vornado Realty Trust
• Market value: $12.3 billion
• Dividend yield: 4.1%
• 1-year return: -3.2%
• 5-year return: -5.7%

The hulking structure on the Chicago River, built to be the nation's wholesale trade capital, was the world's largest building by square footage when it opened in 1930 and has had such well-known owners as Marshall Field & Co. (who built it) and the Kennedy family.

The Merchandise Mart, also known as theMART, is now owned by Vornado Realty Trust (VNO, $64.47) – a REIT known for owning some of those buildings in Times Square, where the advertising is bright and the ball drops on New Year's Eve. If you consider Times Square also to be one of a kind, Vornado is a multi-landmark operation.

VNO shares are deeply discounted at the moment, in part because some of its Manhattan office and retail space is under pressure.

• Owner: Las Vegas Sands
• Market value: $48.7 billion
• Dividend yield: 4.9%
• 1-year return: 23.6%
• 5-year return: 28.5%

The Venetian, which includes the Palazzo Tower, constitutes America's largest hotel with 7,117 rooms. The complex – which also features a casino, restaurants, nightlife and a convention center – is not a formal historical landmark, but it typifies the Vegas Strip, which is a special symbol of America and a backdrop for countless movie scenes.

• Las Vegas Sands' (LVS, $63.52) China and Singapore casinos and hotels provide most of the revenue and profits currently, as well as future growth prospects. But Las Vegas is the name that resonates.

• Owner: Blackstone Group
• Market value: $65.1 billion
• Dividend yield: 3.6%
• 1-year return: 67.8%
• 5-year return: 129.5%

The Willis Tower still is known widely as Sears Tower. For nearly 25 years after its 1973 construction it was the tallest building in the U.S., and it remains conspicuous as ever.

• Blackstone Group (BX, $54.24) – a member of the Kiplinger Dividend 15, a list of our favorite dividend stocks – is a widely diversified holding company. Its many arms include a real estate empire that extends from Motel 6 to luxury hotels to single-family homes.

Most U.S. companies that pay dividends do it quarterly, or once every 90 days or so (foreign firms usually pay but once or twice a year). If your income stocks are on the same schedule, your payments will come much less regularly than, say, your relentless gas and electric bills.

That's why many retirees and other dividend fans try to arrange matters so the income arrives more frequently. You can easily assemble a set of excellent dividend stocks with staggered pay dates. That's the idea of our Dividend-a-Month portfolio, assembled by the editors of Kiplinger's Investing for Income: cash every month, without interruption. You can play the calendar without dabbling in questionable stocks or worrying about the reliability of dividends.

As a practical matter, note two key dates for dividend stocks. One is the "record date," the deadline to be a shareholder so you get the next payment. The record date is usually three to six weeks before the "payment date," which is when the dollars should appear in your brokerage account. We're using the actual arrival of the payment to match companies with their months.

Data is as of Nov. 20. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.

• Market value: $55.4 billion
• Dividend yield: 2.5%
• 5-year annual dividend growth: 17.5%
• Payout schedule: January, April, July, October
• Illinois Tool Works (ITW, $172.44) is a global manufacturer and inventor with many segments from car parts to welding supplies to restaurant equipment. Only half of its revenues are generated in North America, with the rest coming from around the world.

ITW also is a Dividend Aristocrat – one that has improved its annual payout for 56 consecutive years.

• Market value: $39.9 billion
• Dividend yield: 3.7%
• 5-year annual dividend growth: 27.9%
• Payout schedule: February, May, August, November
• Valero Energy (VLO, $97.19) is the world's largest independent refiner (meaning a refinery owner that does not produce its own oil).

It's named after the original moniker of The Alamo – Misión San Antonio de Valero – the symbol of Valero Energy's hometown.

• Market value: $251.9 billion
• Dividend yield: 2.2%
• 5-year annual dividend growth: 5.9%
• Payout schedule: March, June, September, December

Famous chip producer Intel (INTC, $57.90) was among the first technology titans to start paying dividends. It hasn't raised its quarterly dole every single year since its first payout in 1992, but it has authorized 23 increases across that time.

• Market value: $22.3 billion
• Dividend yield: 1.4%
• 5-year annual dividend growth: 8.9%
• Payout schedule: January, April, July, October
• McCormick (MKC, $167.95) is a classic income-and-growth investment that's fueled by its great brands, from Old Bay Seasoning in its Maryland backyard to household names in Europe, Asia and Latin America.

Another Aristocrat, McCormick increased its dividend by 10% starting with the October payout, extending its streak of annual dividend hikes to 34 years.

• Market value: $97.5 billion
• Dividend yield: 2.7%
• 5-year annual dividend growth: 17.3%
• Payout schedule: February, May, August, November

Giant drugstore chain CVS Health (CVS, $74.92) also features a pharmacy benefits management business and has extended into providing patient care via its MinuteClinics.

Its latest venture: CVS jumped into the health-insurance arena in 2018 via a roughly $70 billion merger with Aetna.

• Market value: $4.0 billion
• Dividend yield: 2.3%
• 5-year annual dividend growth: N/A
• Payout schedule: Monthly

The WisdomTree U.S. MidCap Dividend Fund (DON, $37.11) is an exchange-traded fund (ETF) that targets companies with market caps between $2 billion and $18 billion. It invests about 25% of the portfolio in real estate investment trusts (REITs) and utilities.

One special feature about DON: It pays a dividend every month.

• Market value: $406.6 billion
• Dividend yield: 2.8%
• 5-year annual dividend growth: 12.8%
• Payout schedule: January, April, July, October
• JPMorgan Chase (JPM, $129.63) is America's largest banks by assets and one of the largest financial firms in the world. In addition to serving millions of customers through its retail arm, it also offers commercial banking, investment banking and asset management, among other businesses.

Like most banks, JPM was forced to cut its payout amid the Great Recession to a nickel per share. However, it has aggressively grown those payouts since 2011, to 90 cents per share – more than double what it paid out before the 2007-09 bear market.

• Market value: $25.4 billion
• Dividend yield: 3.5%
• 5-year annual dividend growth: 4.0%
• Payout schedule: Monthly
• Realty Income (O, $77.99) is a well-known REIT that owns more than 5,900 single-tenant properties. It leases those properties out retailers such as CVS and Walgreens (WBA), gyms, theaters and restaurants, typically with long-term agreements.

Realty Income is one of the market's most well-known monthly dividend stocks and has a history of frequent (though small) payout increases.

• Market value: $357.8 billion
• Dividend yield: 2.8%
• 5-year annual dividend growth: 6.5%
• Payout schedule: March, June, September, December
• Johnson & Johnson (JNJ, $135.94) is one of the world's biggest and most diversified health-care companies, boasting not just consumer brands such as Tylenol and Band-Aids, but pharmaceutical and medical-device divisions too.

Investors have had to deal with the occasional controversy. However, J&J has a tremendous growth record, as well as a 57-year streak of consecutive dividend improvements.

• Market value: $73.8 billion
• Dividend yield: 2.1%
• 5-year annual dividend growth: 10.2%
• Payout schedule: January, April, July, October
• Automatic Data Processing (ADP, $170.58) likely prints out your paycheck among the millions it handles across 140 countries.

ADP, yet another Dividend Aristocrat, recently announced a 15% boost to its quarterly payout – good for its 45th uninterrupted year of growing dividends.

• Market value: $53.3 billion
• Dividend yield: 2.2%
• 5-year annual dividend growth: 16.7%
• Payout schedule: February, May, August, November
• General Dynamics (GD, $184.33) is another Dividend Aristocrat, this time in the defense space. GD owns technology and military businesses, from jet planes to tanks and submarines, and it also makes Gulfstream civilian jets. Two-thirds of the revenue comes from the U.S. government.

GD is among the younger Aristocrats, at 26 years of higher payouts. (Membership requires 25 consecutive years.)

• Market value: $45.2 billion
• Dividend yield: 3.1%
• 5-year annual dividend growth: 5.3%
• Payout schedule: March, June, September, December
• American Electric Power (AEP, $91.46) is our favorite no-nonsense, no-frills electric-generating enterprise. with operations in 11 Midwestern and Southern states. It has elevated its dividend every year since 2005.

Most investors know about tech stocks that have harnessed the cloud for growth, such as Salesforce.com (CRM), Adobe Systems (ADBE) and Amazon.com (AMZN).

But are you familiar with the cloud's landlords?

“Cloud czars” don't operate entirely on their own. There's a huge industry in connecting these clouds to each other, and to large and small customers alike. It requires cell towers, data centers and other communications technology.

A number of real estate investment trusts (REITs) specialize in properties and other assets that ensure your tablet can stream Netflix (NFLX) content and that your company's data is secured in the cloud. As a reminder: REITs are a special type of business structure – one that requires at least 90% of taxable income be paid out to shareholders as dividends, in exchange for generous tax benefits.

Many of these stocks have risen by leaps and bounds in 2019, though they're getting expensive as a result. Still, they sit smack-dab in the middle of a growth industry, and some of them remain valuable as takeover targets. Private equity firms EQT Partners and Digital Colony Partners bought fiber network owner Zayo Group for $8 billion in May. And in October, Digital Realty Trust (DLR) bought European data center giant Interxion (INXN) for $8.4 billion.

Here are five REITs that can help you squeeze dividends out of the cloud. If you're looking for a broad-based play on the industry, the Pacer Benchmark Data & Infrastructure Real Estate ETF (SRVR) invests in 20 such companies. However, these five holdings stand out among the rest.

Data is as of Nov. 4. Stocks listed by yield. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.

• Market value: $93.5 billion
• Dividend yield: 1.7%
• American Tower (AMT, $211.07) is a telecom-infrastructure REIT that owns roughly 171,000 communications sites worldwide, including 41,000 in the U.S. Its solutions include cell towers, broadcast towers, antennas and even "smart" light poles. It serves a wide array of customers, but it's primarily known in America for powering cell service for telecoms such as AT&T (T), Verizon Communications (VZ), Sprint (S) and T-Mobile US (TMUS).

The company was founded in 1995 in Boston as a subsidiary of American Radio. But it was spun out when American was bought by CBS Corp. (CBS) and Viacom (VIAB) in 1998. It became a REIT in 2012.

A secret to American Tower's early growth was its purchase of microwave relay towers from the old AT&T long-distance company, which it repurposed as cell phone towers. The company began international operations soon after it was formed, expanding into Mexico in 1999 and launched operations in Brazil in 2000.

AMT shares only yield 1.7% right now, which is less than you're getting from a 10-year Treasury. But it's not for lack of effort on management's part. The dividend has grown every single quarter since American Tower became a REIT in 2012, and has exploded by 170% over the past five years. But the stock has more than doubled during that same time frame, suppressing the yield at current prices.

Shares have pulled back by about 10% over the past couple weeks, thanks to uncertainty from the Sprint/T-Mobile merger and Indian telecom carrier consolidation. But Cowen's Colby Synesael (Outperform, equivalent of Buy) writes that the dip is a buying opportunity. He recently raised his price target, from $238 per share to $260, citing decent third-quarter results and the potential for stronger upside in 2020.

• Market value: $55.9 billion
• Dividend yield: 3.6%
• Crown Castle International (CCI, $134.50) was founded in Houston in 1994 with 133 cell towers in Texas. The REIT now owns more than 40,000 cell towers across the U.S., as well as roughly 70,000 small cell nodes, which are attached to infrastructure such as signposts or streetlights to help support coverage.

Crown Castle has always been acquisitive. It acquired a rival tower operator, Global Signal, in 2007, then entered tower leasing agreements with T-Mobile and AT&T early in the current decade, adding 17,000 more towers and doubling in size. The long-term leases on these towers help support a stable and growing dividend.

What distinguishes Crown Castle from American Tower is its strategy after becoming a REIT. Instead of buying more cell towers, it began buying fiber cable networks – first Sunesys, then Fibernet Direct, then Wilcon and Lightower. It now has more than 75,000 route miles of fiber, making it one of the largest such networks in the U.S.

These kinds of technologies will provide the backbone for America's expansion into 5G, which in turn means Crown Castle, American Tower and similar infrastructure companies will have no shortage of demand.

Crown Castle hasn't bulked up its dividend as aggressively as American Tower, but the payout has still improved by 46% over the past five years. Its current yield, however, is more than twice that of AMT.

SunTrust analyst Greg Miller reiterated his Buy rating on CCI shortly after the company announced a third-quarter earnings beat and dividend hike. He's encouraged by the company's 2020 outlook for funds from operations (FFO, a vital REIT profitability metric), and thinks the company should be able to adequately tackle carriers' needs as they deploy their 5G systems.

• Market value: $8.0 billion
• Dividend yield: 2.8%
• CyrusOne (CONE, $70.43) is a data-center owner and operator that's also organized as a REIT. It was formed in 2001, acquired in 2007 by ARBY Partners, acquired again in 2010 by Cincinnati Bell (CBB), then eventually spun off in an initial public offering in 2013.

CyrusOne now has 45 data centers worldwide, serving almost 20% of the Fortune 1000, and it's America's third largest data-center provider. Its solutions allow customers take advantage of cloud platforms such as Amazon Web Services and Microsoft Azure.

Tim Chubb, chief information officer at King of Prussia, Pennsylvania-based wealth advisory firm Girard, says, "The blazing-fast adoption of enterprise cloud platforms as well as the broader use of the Internet of Things and AI, will lead to substantial demand for the data center industry for years to come."

Indeed, CyrusOne has been growing like a weed, with normalized FFO sprouting from $112.9 million in 2014 to $332.3 million in 2018. However, several analysts have downgraded the stock this year amid weak results in 2019 and worries about demand for hyperscale solutions, which can grow and shrink as a business requires. Nonetheless, UBS analysts expect CONE "to benefit from (long-term) secular trends in the data center industry."

This REIT delivers on the income front, too. It has grown its payout by 138% over the past half-decade, though the stock's 163% ascent over that time has kept a lid on the yield.

• Market value: $46.3 billion
• Dividend yield: 1.8%
• Equinix (EQIX, $543.20) is another data-center REIT, this one founded in 1998 by two facilities managers at Digital Equipment Corp., which eventually merged with HP Inc. (HPQ).

Equinix spent its first decade growing primarily through acquisitions, buying other large colocation owners (colocation centers allow businesses to rent space for physical hardware such as servers) in Asia and Europe through 2010. Since then, it has more than tripled the number of data centers it owns. It became a REIT in 2015.

Equinix' secret sauce is its Network Edge, a service on its global Equinix Cloud Exchange Fabric that lets customers "select, deploy and connect launch new virtual network services at the edge in minutes, with no additional hardware requirements." This differentiates Equinix's offerings beyond real estate and basic connectivity. Technology analyst firm 451 Research has given the idea its "Firestarter" award. Research director Dan Thompson said it means customers can "easily reach infrastructure in any one of its 200 datacenter facilities around the world."

The analyst community is widely bullish on this REIT, with 12 of 13 analysts tracked by TipRanks doling out Buy-equivalent ratings on the stock over the past three months. Among them: Wells Fargo's Jennifer Fritzsche (Outperform), who raised her price target on EQIX from $545 per share to $620. She says the company's strength in smaller-footprint metro-market bookings is more evidence of the company's "moat."

The dividend, meanwhile, has been adjusted 46% higher since the company converted to a REIT structure in 2015.

• Market value: $26.4 billion
• Dividend yield: 0.6%
• SBA Communications (SBAC, $234.60) is, like American Tower and Crown Castle, an owner and leaser of communications infrastructure. It was founded in 1989 and has expanded its operations to include North, Central and South America. SBA views itself as a developer as well as an operator, working with property owners "to strategically develop and monetize the wireless infrastructure potential of their real estate assets" and working with wireless service operators to acquire sites, then build them out.

Also like AMT and CCI, SBA Communications expects the deployment of 5G technologies to fuel the company's growth. SBA crossed the $500 million quarterly revenue mark earlier this year, and CEO Jeffrey Stoops says, "we believe that strength will continue into 2020 as our customers remain on a multi-year path to provide 5G service."

SBA also has a budding opportunity in South Africa. In August, the company closed on its $140 million buyout of 94% of a joint venture in South Africa, which includes roughly 890 towers. SunTrust analyst Greg Miller raised his price target in July, from $217 per share to $255, writing that second-quarter earnings and the announcement of the JV acquisition supported his long-term bull case.

This REIT is an odd one, in that it became a real estate investment trust in 2016, but didn't pay dividends for years. It was allowed to do so because it used net operating loss (NOL) carryovers from previous years to offset its taxable income. But it finally initiated a dividend earlier this year – a 37-cent quarterly payout that translates into a currently meager yield.

However, if SBAC's dividend growth mirrors any of the other REITs on this list, current shareholders should enjoy a much more substantial yield on cost within a few years.

A strong economy typically lifts the broader market, and a rising broader-market tide will lift a lot of boats. But not all of them. Even in the midst of America's longest bull market, numerous publicly traded companies are struggling – including several dividend stocks whose payouts appear to be on thin ice.

Dividend cuts and suspensions are among the worst things that can happen to shareholders – especially those that are relying on that stock for retirement income. Not only are you missing out on cash you were depending on, but the stock's value itself typically suffers ahead of – and after – that kind of announcement.

Fortunately for investors, dividend cuts don't come out of nowhere. Even once-proud blue chips such as General Electric (GE) and Kraft Heinz (KHC) telegraphed considerable financial issues before ultimately slashing their regular payouts. But investors need to heed these signs. For instance, high yields – especially if a stock's yield is much higher than its industry peers – can be a sign of heightened risk and a struggling stock (as stock prices go down, dividend yields go up). Also, watch out for companies that pay out most or all of their earnings in dividends, as they will have little breathing room should their profits dip.

Here, we look at nine dividend stocks that are flashing warning signs of a payout cut. Some of these companies have already chopped their dividends within the past few years. Some of them have maintained or even grown their payouts of late. In no case is a dividend cut or suspension a guarantee, but all of them face issues that, at the very least, should have current and prospective shareholders on their guard.

Data is as of Nov. 3. Stocks listed by yield. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.

• Market value: $14.0 billion
• Dividend yield: 3.0%

Campbell Soup (CPB, $46.54) once was among the most reliable dividend stocks in the consumer staples sector. However, lately, it has been shedding assets to cut costs and free up cash for debt reduction. In August, the company confirmed that KKR & Co. (KKR) was buying its Australian snacks unit, Arnott's, as well as other international operations, for $2.2 billion. In September, it sold off Denmark-based Kelsen Group for $300 million.

Campbell shares recovered somewhat in August after the company reported better-than-expected June-quarter earnings. However, Bank of America analyst Bryan Spillane viewed this price jump as a selling opportunity, writing in late August that 2020 has the potential for "no growth." CPB is guiding for 1% to 3% sales growth next year, but Spillane notes that fiscal 2020 will have an extra week, making actual 2020 sales comparisons flat.

In addition to sluggish growth, Campbell’s massive $9.5 billion debt load limits its options because extra cash flow must go toward debt reduction.

The company 2019 EPS from continuing operations at $1.57 barely covered its $1.40 annual dividend, resulting in a high payout ratio of nearly 90%. That dividend, by the way, has stood still since 2017 – and that's unlikely to change, given that the company's own three-year turnaround doesn't see its sales/EPS trajectory changing much before 2021.

All of these factors and more have contributed to a DIVCON 1 score from the DIVCON dividend health rating system, which uses a 1-to-5 scale to illustrate the strength or weakness of a stock's payout. A DIVCON 1 score indicates a high likelihood of a dividend cut within the next 12 months.

• Market value: $774.2 million
• Dividend yield: 4.4%

Pitney Bowes (PBI, $4.53), which was founded almost a century ago, is a longstanding industry leader in postage meters and mailing services. But the company has been forced to pivot away from its legacy business as the volume of physical mail declines. More recently, PBI has been acquiring mailing, shipping and financing operations that serve small and medium-sized businesses.

Pitney Bowes' portfolio restructuring is progressing, but the company's profits are declining thanks to investments in the new businesses, which also carry lower margins than its legacy operations. In its second quarter reported in August, earnings were cut by more than half on revenues that slumped 9%. Later that month, PBI announced the sale of its Software Solutions business and recast its 2019 EPS estimates, going from a range of 90 cents to $1.05 per share to a range of 65 to 75 cents per share.

PBI is among several dividend stocks on this list that have already slashed payouts once this year. Pitney Bowes' dividend was reduced from 18.75 cents per share to just a nickel. Yet its dividend coverage is just so-so – its June-quarter free cash flow (FCF) of $13 million matched up against $9 million in dividend payments. Leverage remains high, too; its $3.4 billion in debt is more than four times the market value of the company, and a similar multiple of its $830 million in cash.

Moody's was concerned enough about this debt load to lower Pitney Bowes' credit rating in April, resulting in a 25-basis-point increase in the interest rate it pays on its debt.

• Market value: $1.1 billion
• Dividend yield: 4.7%

Abercrombie & Fitch (ANF, $17.02) is a mall-based apparel retailer that has been crushed by the simultaneous rise of online shopping and "fast fashion." The company operates more than 860 stores under its Abercrombie & Fitch, Hollister and Abercrombie Kids brands across North America, Asia, Europe and the Middle East.

Abercrombie's sales are in an uptrend since 2017, but still are 4% less than what the company generated back in 2015. ANF shares suffered a double-digit loss in August after the company announced declining June-quarter sales and flat comparable-store sales. It also forecast a full-year decline in gross margins, versus previous guidance for wider margins, and said it expected flat to 2% growth in full-year sales – a downgrade from previous guidance for a 2% to 4% improvement.

The company does have nearly $500 million of cash – a relatively generous war chest, given its size, that ANF has been using on stock buybacks. The company has spent $126.5 million on repurchases, as well as another $80 million on dividends. However, the buybacks look like a poor use of the cash, given that the vast majority repurchases in 2018 and the first half of 2019 came at a significant premium to current prices.

The retailer's dividend payout ratio has declined from 107% last year (that means it was paying out more than it was earning in profits) to 80% over the past 12 months. However, analysts project the company will earn just 76 cents per share this year – 4 cents less than it's scheduled to dole out in cash distributions.

At the very least, expect the dividend to continue its seven-year streak of standing still. If Abercrombie's financials worsen, the buybacks could dry up, as could the dividend.

• Market value: $16.0 billion
• Dividend yield: 3.7%

Western Digital (WDC, $53.83), a high yielder among technology dividend stocks, manufactures computer hard drives and data storage devices. The company also was a second-tier player in the dedicated-storage-systems market – competing against the likes of Dell EMC, Hewlett Packard Enterprise (HPE) and International Business Machines (IBM) – but recently decided to exit that business. WDC sold its IntelliFlash division and announced it would explore strategic options for its ActiveScale business.

Western Digital's previous fiscal year ending in June saw a 20% sales decline and net losses of $2.58 per share. It recently broke a four-quarter string of earnings misses with a profit beat for the quarter ended Oct. 4., but December-quarter earnings guidance disappointed the analyst community. Western Digital also is dealing with a management shift; the company announced CEO Steve Milligan will retire once WDC finds a successor.

If analysts' projections for this year pan out, Western Digital's payout ratio will be a hefty 76%, on a 50-cent quarterly dividend that hasn't grown in years. Meanwhile, the company has $10.2 billion in debt, and owes $1.2 billion in debt over the next three fiscal years alone. If pricing in the flash market remains near cyclical lows, Western Digital may need to trim its dividend to focus on deleveraging.

Evercore analyst C.J. Muse raised the specter of a dividend cut last January, noting that with high debt, the current $2.00 dividend, and free cash flow tracking only $2.35 per share in fiscal 2020, Western Digital would be hard-pressed to maintain its dividend. Commenting on WDC stock in September, Muse acknowledged that NAND pricing may be reaching an inflection point but said there are still "structural headwinds limiting the magnitude of the recovery" that should return in 2020.

• Market value: $4.8 billion
• Dividend yield: 6.8%

L Brands (LB, $17.54) is known for its Victoria's Secret, Pink and Bath & Body Works brands, sold through more than 3,600 stores.

The company – weighed down by online competition, fading brand power, slumping comparable-store sales and a heavy debt load – announced a turnaround plan in September that didn't do much to wow analysts.

BofA Merrill Lynch's Lorraine Hutchinson wrote that "It is too early to tell if recent marketing changes will move the needle and we view the brand's strategy to reduce choice count by 50% for holiday as very risky." MKM Partners' Roxanne Meyer said the efforts could take time: "Even if the product/vision does take hold, it could take several quarters to wean customers off of the intense promotional activity they expect."

L Brands' comparable-store sales dropped 1% in the June quarter, hampered by a 6% decline at Victoria's Secret. Earnings per share sank by 61% year-over-year. During the first half of 2019, LB earned 28 cents per share in profits – less than half of what it needed to cover 60 cents per share in cash distributions. And that reflects a 50% cut to the dividend earlier this year.

The company now sits on about $9.2 billion in debt against $853 million in cash – a number that has plunged by 40% in just six months. Adding to this retailer's woes: CEO Les Wexner is trying to distance himself from the Jeffrey Epstein scandal (Epstein managed Wexner's money for years), and in August, L Brands announced the departure of CMO Ed Razek, who had led the company's marketing efforts since the early 1980s.

• Market value: $37.8 billion
• Dividend yield: 7.5%

The story of Occidental Petroleum (OXY, $42.29) changed significantly earlier this year when it bid $38 billion to acquire rival Anadarko – piling on debt and issuing $10 billion of dividend-paying preferred stock to Berkshire Hathaway in the process. While the deal makes Occidental significantly larger, analysts question whether it makes the company more valuable. Evercore analyst Doug Terreson wrote in September that the takeover "destroyed value" and reduces OXY's return on capital employed by 30%.

In August, Occidental shares slumped to their lowest level in more than a decade after the company revealed some of its acquired assets were hampered by downtime and short-term processing limitations. The company was forced to issue weak production guidance for both the third quarter and the full year.

Interest payments on its massive debt load, coupled with $800 million of annual dividend payments on the preferreds it issued to Berkshire, could put serious strain on Occidental's ability to pay dividends on its common stock. Like other dividend stocks, OXY's situation could get even worse if oil prices decline.

The company extended its streak of dividend hikes to 17 consecutive years with a penny-per-share bump to 79 cents quarterly. That comes out to $3.16 per share. However, analysts on average project 2019 earnings per share (EPS) of $2.58, then $1.93 in 2020.

Occidental says it wants to move quickly to reduce debt, which hints that cash flow may be redirected from dividends to deleveraging. SunTrust analyst Neal Dingmann rated the stock Hold in September, saying it will need to make "key external transactions" to reduce its leverage. It also believes growth will suffer as OXY makes sure it generates enough cash flow to take care of shareholders.

• Market value: $570.9 million
• Dividend yield: 8.8%

Torc Oil & Gas (VREYF, $2.61) is a Canadian energy company that owns oil and gas assets in southeastern Saskatchewan and central Alberta's prolific Cardium play. It's likely the least-recognizable name on this list – it only trades in America over-the-counter – but its sky-high yield and monthly payout schedule might still attract some interest.

The company has a C$180 million capital spending program this year that's focused on sustainability and protecting the balance sheet. The company lists its strategic priorities as maintaining a strong balance sheet and managing production declines via development and tuck-in acquisitions.

Interestingly, Torc spelled out in its recent investor presentation that the "dividend is a capital allocation decision." Indeed, the company has trimmed its payout in the past amid weak oil prices. Torc reduced its monthly dole by 56% in 2016 – from 4.5 Canadian cents per share to 2 cents – and has only brought that figure back up to 2.5 cents per share across a pair of hikes since.

Torc doesn't have much breathing room to cover its current payout if oil prices drop. At prices of US$55 per barrel of West Texas Intermediate crude, Torc estimates capital spending and dividends will consume 82% of cash flow. At $50 per barrel, they consume 100%. Oil prices currently sit around $57 per barrel, so Torc is in the clear. But its situation becomes much hairier should the commodity decline to late 2018 levels.

• Market value: $474.7 million
• Dividend yield: 11.1%

Tupperware Brands (TUP, $9.73) faces an uphill battle to protect its dividend due to steadily declining sales and earnings. Best known for its plastic storage containers, the company has fallen on hard times due to millennial customers switching to more eco-friendly alternatives and online shoppers rejecting the company's direct-to-consumer model, which relies on sales through its 2.9 million-member independent sales force.

Tupperware has missed consensus analyst sales and earnings estimates for three consecutive quarters. Its latest miss was a doozy – Q3 profits of 43 cents per share, versus expectations for 62 cents. Worse: Sales declined across all its geographic markets, and the number of active sellers fell 9%, suggesting no quick fix to Tupperware's revenue woes.

The road ahead looks bleak, too. Tupperware lowered its full-year sales forecast, from a revenue decline of 9% to 11% to a decline of 12% to 14%. Its full-year EPS guidance, for $2.77 to $2.83 per share, also was well short of consensus expectations for $3.47 per share.

Troubling for the dividend is downgraded cash flow expectations. The company expects cash flow from operations (net of investing) of $65 million to $80 million for the year. But Tupperware is on pace to pay out roughly $73 million in dividends. Granted, the company did cut its dividend by 60%, slashing its quarterly dividend obligation to about $13.2 million. But its declining cash flow suggests that another cut might be necessary – especially considering that TUP is on the hook for nearly $45 million annually in interest expense payments, too.

Tupperware has delivered a dividend for roughly two decades, but that payout hasn't gone anywhere but down since 2013. The previous cut shows that the distribution isn't sacred, seemingly increasing the possibility it could be cut again to conserve cash.

• Market value: $822.9 million
• Dividend yield: 22.7%

Washington Prime Group (WPG, $4.41) is a landlord of Class B and C mall properties (read: typically older, and often in less-than-desirable locations).

While a nearly 23% dividend yield certainly captures the attention, investors should note that the high yield is the product of a plunging share price – WPG stock has lost more than half its value over the past three years. The real estate investment trust (REIT) has been hammered by tenant bankruptcies and falling occupancy rates. Major tenants recently lost to bankruptcy include Bon-Ton, Charlotte Russe, Gymboree, Payless Shoes, Sears and Toys "R" Us.

Washington Prime expects adjusted funds from operations (FFO, a key REIT earnings metric) to come in between $1.16 and $1.24 per share this year, down significantly from last year's $1.52 per share, which itself fell from $1.63 per share in 2017. Meanwhile, the dividend has been locked in at 25 cents quarterly for years, so the FFO payout ratio has bulged to a current 83%.

The payout situation looks even worse when you consider Washington Prime's debt and capital spending needs. Washington Prime ended the September quarter with $3 billion in debt, or about four times the company's market value. The company also expects to spend between $90 million and $115 million on redevelopment projects by the end of this year – a vital expenditure considering the age of some of its properties.

While the company has affirmed its dividend guidance for the rest of the year, WPG's cash situation is headed in the wrong direction. Even if it does maintain its dividend at current levels, doing so might come at the expense of other needs.

Stocks and bonds have largely rewarded market denizens since the Great Recession’s market nadir in 2009, but investors great and small may be pondering how much leg the current rally has left. Real estate investment trusts (REITs) might be the asset class investors need to thread the needle in this tenuous bull market.

This summer, prominent hedge-fund king Ray Dalio wrote that market paradigms are shifting, and the next decade’s prospects are for slow growth and chronically soft interest rates. He believes the world’s central banks, including America’s Federal Reserve, “doing more of this printing and buying of assets will produce more negative real and nominal returns that will lead investors to increasingly prefer alternative forms of money (e.g., gold) or other storeholds of wealth.”

While Dalio suggests investors might add gold to their portfolios, they might want to start researching REITs to buy, too. That’s because real estate also has been a classic hedge against inflation, and it tends to benefit from low interest rates.

Another upside: REITs can throw off substantial income; gold does not. By law, real estate investment trusts must distribute 90% of taxable income to shareholders through dividends. But the ultimate hedge is finding REITs that reliably (and, when possible, aggressively) increase their payouts, as that will keep the dividend from actually losing value due to inflation over time.

Here are seven REITs to buy for investors who are interested in dividend growth. These real estate companies are poised to sustain and improve their cash distributions through the possibly sluggish, low-interest-rate future that some experts are predicting.

Data is as of Oct. 6. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.

• Market value: $6.8 billion
• Dividend yield: 3.6%
• 5-year average annual dividend growth: 19.7%

CubeSmart (CUBE, $35.19) owns and/or operates a growing national chain of more than 1,150 self-storage facilities – a prosaic but steady front of the REIT world that offers a dike against recessionary tides. The company serves not only ordinary households, but businesses and even boat owners. Thus, it harbors a diverse clientele spread across 38 states – with large concentrations in Florida, Illinois, Texas, New York and California – and the District of Columbia.

CubeSmart, the third-largest self-storage yard operator in the nation by annual revenue, went public back in 2004. CUBE did cut its dividend back during the Great Recession, but it began a spree of aggressive dividend growth in 2011. The payout has re-emerged from a post-recession 2.5 cents per share in 2010 to 32 cents today.

What’s important is that funds from operations (FFO, an important REIT profitability metric) have been there to support these hikes. The company’s adjusted FFO (AFFO) has grown for six straight years. Second-quarter AFFO of 42 cents per share was up a penny year-over-year. And management is guiding for full-year AFFO of $1.66 to $1.68 per share, up from last year’s $1.64.

In July, Moody’s affirmed CubeSmart’s debt at an investment-grade Baa2 senior unsecured rating, saying the REIT has “good financial flexibility and modest use of leverage as measured by net debt-to-EBITDA (earnings before interest, taxes, depreciation and amortization).”

Moody’s also lauded CubeSmart’s “experienced management team and strong operating expertise.” It’ll need that in the competitive self-storage business, which spans an estimated 48,000 to 52,000 facilities in the U.S. and has low barriers to entry.

Still, CUBE shareholders can take solace in knowing that the self-storage business also is considered “recession-resistant.” That’s because economic downturns tend to force people to downsize, which sends them packing their extra stuff in CubeSmart’s units. Lower interest rates, should they come to pass, will make the REIT’s rising dividends more attractive, too.

• Market value: $57.3 billion
• Dividend yield: 3.3%
• 5-year average annual dividend growth: 26.3%

Investors aware of the ubiquitous use of smartphones and tablets in public might be inclined to buy Crown Castle International (CCI, $137.92) – the largest owner-operator of U.S. telecommunications assets. The REIT’s communication infrastructure is eye-popping, composed of more than 40,000 cell towers, 65,000 small-cell nodes and about 75,000 route miles of fiber into every major American market.

Its infrastructure helps power AT&T (T), Verizon (VZ), T-Mobile US (TMUS) and Sprint (S) communications technologies. So if you see someone using their smartphone, there’s a decent chance Crown Castle is making that possible.

Crown Castle, which yields more than 3%, has been raising its dividend for years. Its most recent dividend hike – a 7% upgrade to $1.125 per share, came last October. Its dividend growth should be well-supported by AFFO, which management forecasts will grow 7%-8% annually for the foreseeable future. (Its second-quarter AFFO jumped 13% year-over-year, and the company expects the full-year figure to hit the high end of its expected range.)

It takes a lot of capital to build out communications networks, and Crown Castle borrows big. Nonetheless, in July, Moody’s Investors Service affirmed its Baa3 (investment-grade) rating on CCI’s senior unsecured credit, citing the REIT’s “robust internally generated cash flows supported by its tower and fiber business.” Moody’s adds, “CCI’s long-term non-cancellable leases with contractual rent escalators provide high visibility into future earnings and stability of cash flows.”

Moody’s does say that if there is a risk to Crown Castle, it is the possibility of unanticipated technological disruptions. For now, though, technology is on CCI’s side. AT&T, Verizon and others are working on a nationwide rollout of “5G” services – the more-powerful telecom technology that will further weave the internet into everyone’s lives. That is powering heavy demand for the REIT’s towers, small cells and fiber assets.

• Market value: $12.4 billion
• Dividend yield: 1.8%
• 5-year average annual dividend growth: 13.1%

Equity LifeStyle Properties (ELS, $136.42) owns and operates more than 400 manufactured home communities, RV resorts and campgrounds in 32 states and British Columbia, spanning more than 145,000 sites. With baby boomers hitting retirement by the millions, low-cost manufactured housing and RV parks are in high demand.

You can see it in the company’s results. Its latest guidance for full-year 2019: “normalized” FFO of $4.12 to $4.22 per share. That compares to $3.87 in 2018, and $3.60 in 2017. The company also registered 8% year-over-year FFO growth during the second quarter, to 96 cents per share.

Yes, ELS has a low 1.8% yield that’s actually less than the S&P 500. But that’s not from a lack of dividend growth. It’s just hard for the payout to keep up with the stock price, which has rocketed ahead by more than 90% over the past three years.

But investors who get into Equity LifeStyle now should enjoy higher yields on cost as it continues to hike its payouts in the year ahead. The REIT is well-positioned to catch the growing seniors market; about 10,000 Americans retire every day, and some of them are looking to downsize. Better still, they have nest eggs, pensions and Social Security, helping insulate them somewhat from a potential recession.

• Market value: $25.0 billion
• Dividend yield: 3.5%
• 5-year average annual dividend growth: 4.4%

Realty Income (O, $78.41) owns more than 5,900 properties in 49 states, Puerto Rico and the U.K., leased out to 265 different tenants across 49 industries. However, it is retail-heavy, with that industry accounting for about 83% of the REIT’s rental income.

It’s no secret what online retail has done to brick-and-mortar retail here in the U.S. – one reason why the stock has waffled for the past few years. But as management noted in its last earnings call, “95% of our rent comes from tenants with a service, nondiscretionary and/or low-price-point component to their business.” Another reason to believe in Realty Income’s model: It deals in “triple-net” leases, which means they’re net of taxes, insurance and maintenance. Realty Income merely collects the rent checks – making its revenues and FFO much more regular and dependable.

And despite retail’s woes, Realty Income is flashing signs of growth. The REIT posted AFFO of 82 cents per share in the second quarter, up from 80 cents in the year-ago quarter. And for the full year, management is targeting AFFO of $3.28 to $3.33 per share, up from $3.19 in 2018.

Realty Income also is the most well-known of the monthly dividend stocks – which is what happens when you brand yourself the “Monthly Dividend Company.” It has paid an impressive 590 consecutive monthly dividends, including 88 consecutive quarterly increases.

Moody’s provides plenty of reason to believe that dividend is safe and will keep growing. “Realty Income’s A3 senior unsecured rating reflects the REIT’s excellent management team and long track record in maintaining a well-capitalized balance sheet with conservative leverage. The REIT’s operationally strong retail portfolio is also well-insulated from e-commerce and shifts in consumer spending, a credit positive.”

• Market value: $8.8 billion
• Dividend yield: 3.7%
• 5-year average annual dividend growth: 25.2%*

STORE Capital (STOR, $38.05) is a diversified net-lease REIT that invests in “single tenant operational real estate” – hence the name “STORE.” It boasts 2,389 properties that it leases out to 456 customers across all 50 states, with a top-flight 99.7% occupancy as of this writing.

Service companies, such as restaurants, health clubs and movie theaters, make up the largest chunk of its properties at 64%, with the rest in retail (19%) and manufacturing (17%). STOR also focuses on long-term leases, with an average remaining term of 14 years on its existing leases.

STORE Capital’s claim to fame? It’s the only REIT currently held by Warren Buffett’s Berkshire Hathaway (BRK.B). Buffett bought his stake back in 2017 and is in fact the second-largest shareholder in the company, after Vanguard.

The REIT passes muster with Moody’s, which is encouraging. “STORE Capital’s Baa2 (investment-grade) credit profile reflects the company’s rapid expansion and growing cash flow stream, generated from its highly diversified, highly occupied portfolio of single-tenant properties with long-term triple net leases and annual rent bumps,” Moody’s wrote in August, adding that the REIT also had a “sound balance sheet.”

STORE Capital has improved its dividend every year since going public in 2014. Its latest hike – a 6.1% bump to 35 cents per share – was announced in early September. The REIT’s profit growth should continue powering future increases. In its second quarter, AFFO came to 45 cents per share (up a penny from last year’s Q2). The company also said it expects full-year AFFO of $1.92 to $1.96 per share, which would be an improvement from 2018, when it earned $1.85 per share.

* Reflects annualized dividend growth since going public in November 2014.

• Market value: $10.6 billion
• Dividend yield: 5.2%
• 5-year average annual dividend growth: 13.3%*

VICI Properties (VICI, $22.95) is a gaming-focused REIT that owns 22 properties – including Caesars Palace – that span 14,800 hotel rooms, and more than 150 restaurants, bars and nightclubs. In addition to Caesars, it also owns nine Harrah’s facilities across the country, race tracks and golf courses.

VICI Properties, which only went public in February 2018, has a limited dividend-growth history, but its prospects look attractive.

The casino gaming industry is perpetually growing. Gaming revenues improved 3.5% year-over-year in 2018 to a record high $41.7 billion, according to the American Gaming Association. In modern times, national commercial casino gaming revenues have fallen only once in annual terms – 2009, during the Great Recession – and then only mildly.

The company posted adjusted FFO of 38 cents per share in the second quarter, up from 35 cents in the year-ago period. Management projects full-year 2019 adjusted FFO of $1.45 to $1.47 per share, up modestly from $1.43 per share, in part because it has been issuing new shares. But management also notes it has financed acquisitions with equity instead of debt (indeed, the company believes an investment-grade debt rating is between 18 and 36 months away thanks to aggressive deleveraging). This flattens FFO-per-share growth in the short run, but arguably will boost profits in the long run.

VICI has increased its dividend in each of the two years since it hit public markets. In fact, CFO David Kieske said in the most recent earnings call that the company wants to “ultimately be a Dividend Aristocrat,” emphasizing consistent timing for future dividend increases. We’ll check in on that in another couple decades ... but the idea that VICI is committed to dividend growth is encouraging.

* Represents annualized dividend growth since going public in February 2018.

• Market value: $8.9 billion
• Dividend yield: 6.2%
• 5-year average annual dividend growth: 9.6%*

MGM Growth Properties (MGP, $30.47), which was spun off of MGM Resorts International (MGM) in 2016, owns or otherwise controls 14 resorts in Las Vegas and across the U.S., as well as a large-scale dining-and-entertainment district on the Las Vegas Strip. Its assets include 27,400 hotel rooms, 150 retail outlets, 300 dining-drinking outlets, 20 entertainment venues, various convention facilities and even a couple of race tracks.

While the company boasts several well-known Las Vegas assets such as Mandalay Bay and Mirage, it is well-diversified geographically. In fact, in its second-quarter report, MGP management noted that less than half the REIT’s EBITDA (earnings before interest, taxes, depreciation and amortization) came from outside Las Vegas. That includes the MGM National Harbor near Washington, D.C., and Borgata in Atlantic City.

Much of MGP’s growth over the past few years has come courtesy of an aggressive acquisition strategy. But the company has organic growth built in, too, via 2% fixed rent escalators on about 90% of its rents. Those are good through 2022, when “revenue to rent” hurdles kick in.

In September, MGM Growth Properties increased its dividend for the ninth time since its IPO, and for the sixth consecutive quarter. It was a marginal increase of about half a percent, but the payout is 7.4% better than it was at this point last year. That’s supported by profit growth – its second-quarter AFFO climbed 7% year-over-year, and 2018’s AFFO was about 11% better than 2017’s.

* Reflects annualized dividend growth since going public in April 2016.

When it comes to your investments, a decade is a long time. Ten years ago, we were just recovering from the 2008 meltdown and the worst recession since the Great Depression. Investors were nursing catastrophic losses. For some, it felt like the world was ending.

Ten years before that, we were in the midst of dot-com mania and the biggest stock market bubble in history. Just a decade before that, no one had ever heard of the internet, and mobile phones were the size of a cinder block. We can only guess what the world will look like 10 years from now.

Real estate traditionally has been a stable store of value. But with the rate of change accelerating in recent years, even the stability of some real estate investment trusts (REITs) has come into question. Amazon.com (AMZN) is taking a wrecking ball to brick-and-mortar retail, Airbnb is turning every spare bed into a viable hotel competitor, and telecommuting is making the traditional office far less critical than it used to be.

For buy-and-hold investors, the key to making money in REITs over the coming decades will be to focus on properties that are as “future-proof” as possible. As fast as the world is changing, we’ll likely always need places to live, medical facilities, warehouses and other mission-critical properties.

Today, we’re going to look at five REITs to buy and hold for decades. After the recent run-up in REIT prices, you don’t necessarily need to run out and buy them today. But find somewhere to write each of these names down so you remember them during a dip. Because if you’re looking for a collection of real estate stocks to throw off the income you’ll need in retirement, each of these fits the bill.

Data is as of Sept. 8. Dividend yields are calculated by annualizing the most recent monthly payout and dividing by the share price.

• Market value: $45.0 billion
• Dividend yield: 3.1%
• Public Storage (PSA, $257.50) is the largest self-storage landlord in the world and benefits from multiple long-term trends.

“Right now, around 1 in 10 Americans rent space in a self-storage facility,” says Brad Thomas, editor of Forbes Real Estate Investor. “Approximately 30 million park their possessions in one of 50,000 self-storage facilities throughout the country.” Thomas adds that millennials represent nearly a third of storage demand and “tend to visit facilities far more frequently than older generations.”

For all the talk about millennials favoring experiences over things, it appears that they’ve managed to accumulate a lot of stuff in their short lives. Public Storage is there to store it for them.

As housing costs continue to rise, smaller urban homes are becoming more commonplace, as is renting. Add to this a long-term trend of downsizing by the baby boomers, and you have the pieces in place for a stable, long-term trend.

Public Storage, which recently hit new all-time highs, isn’t particularly cheap at current prices. But at a time when bond yields are hitting record lows, PSA, and its 3%-plus dividend yield, still has a place among REITs to buy and hold for the long haul. Better still: Over the past decade, Public Storage has raised its dividend a cumulative 264%, or roughly 30% annually on average.

• Market value: $53.5 billion
• Dividend yield: 2.5%

Real estate doesn’t have to be flashy or beautiful to be attractive. In fact, boring is often better. Some of the best deals come from industrial properties far away from the posh parts of town. And while trendy retail centers may rise and fall, one thing is certain: Continued growth in internet commerce will mean strong demand for logistics and distribution centers.

“Industrial real estate tends to be off the radar of most investors because it isn’t sexy,” says Ari Rastegar, founder and CEO of Austin-based real estate developer Rastegar Property. “We have had success with this strategy specifically in Round Rock, Texas, on an industrial redevelopment project. Logistics facilities and warehouses require very little capital spending and, if bought at the right prices, can be wildly profitable.”

To get a piece of this lucrative market, consider shares of Prologis (PLD, $84.79). Prologis is the world’s largest logistics REIT. As of June 30, 2019, the REIT owned or controlled 786 million square feet in 19 countries.

If you believe that Amazon.com is taking over the world, then Prologis – who counts Amazon among its largest tenants – is one way to play that trend indirectly. The REIT isn’t shy about the idea that the e-commerce boom is helping its own growth spurt, typically highlighting some facet of internet retail in its investor presentations to stir up excitement.

Prologis isn’t the highest-yielding REIT to buy out there, as its dividend is a rather modest 2.5%. But if you’re looking for an income stock you can potentially hold for decades, there aren’t too many better positioned than Prologis.

• Market value: $28.0 billion
• Dividend yield: 4.2%

Up next is diversified healthcare REIT Ventas (VTR, $75.23). Ventas is one of the largest REITs in the world by market cap and is the second-largest healthcare REIT, behind $37 billion Welltower (WELL).

Ventas has actively managed its portfolio over the years, shifting out of skilled nursing and increasing its presence in senior housing and medical office buildings. Approximately 56% of Ventas’ portfolio is invested in senior housing, with another 19% in medical office/outpatient buildings. The remaining 25% of the portfolio is invested in loans, health systems, research centers and other health-related properties.

It’s easy enough to understand Ventas’ concentration on senior living facilities, as the aging of the baby boomers will create massive opportunities for operators in that space. But contrary to popular opinion, most boomers still are quite young. The largest cohort of the boomers is just now turning 60. Approximately half of the REIT’s senior residents are over the age of 85. This means Ventas still is decades away from seeing the peak in this market.

Meanwhile, investors can be paid handsomely to wait. At current prices, Ventas yields a very decent 4.3%, and the REIT has a long history of raising its dividend.

• Market value: $2.0 billion
• Dividend yield: 4.6%

On the theme of aging boomers, LTC Properties (LTC, $49.94) also is among REITs to buy and hold for decades.

If you want to know what LTC does, look no further than its ticker symbol. “LTC” is short for “long-term care.” LTC is not a long-term care provider itself, of course. That’s its tenants’ job. LTC Properties simply manages its portfolio, which consists of more than 200 healthcare properties spanning 28 states. The portfolio is divided about 50/50 between senior housing facilities and skilled nursing facilities, with a handful of “other” healthcare properties.

Importantly, about 56% of LTC’s total portfolio is invested in properties that depend on private-paying clients rather than on Medicare or Medicaid. Unfortunately, that still leaves 44% that is dependent on the government.

But remember: LTC isn’t the one operating the facilities; it’s just the landlord. So, even if stingy government reimbursements continue to crimp the industry’s profitability, LTC should be able to keep cashing its rent checks indefinitely.

LTC yields a healthy 4.6% at the moment. And an interesting quirk: It’s a monthly dividend stock, rather than quarterly. That’s nice for aligning your dividend income with your monthly expenses. Or, if you’re reinvesting your distributions, it allows you to compound them just that much faster.

• Market value: $8.7 billion
• Dividend yield: 3.5%

Amazon.com really is that proverbial bull in a china shop. Along with its e-commerce peers, the company has utterly gutted traditional brick-and-mortar retail.

But remember, not all retail properties are created equal. We might have less need to browse clothing or electronics in a mall or big-box retail shop. But until Amazon finds a way to deliver dentists and barbers to your door, we’ll still need service-oriented retail.

And this is precisely the specialty of STORE Capital (STOR, $37.68).

Store Capital holds a diversified portfolio of 2,389 properties scattered across all 50 states with a weighted-average remaining lease term of 14 years. Around 15% of its portfolio is invested in restaurant properties, but preschools, gyms, auto shops and medical and dental centers all make up significant allocations. Service-oriented properties account for nearly two-thirds of the base rent, with the remaining third divided roughly evenly between retail and manufacturing properties.

Store Capital might not be 100% Amazon-proof. But it’s about as close as you can get while still being in the retail brick-and-mortar space. Better still: It has the faith of legendary investor Warren Buffett.

Charles Sizemore was long VTR as of this writing.

Real estate investment trusts are in a sweet spot. The Federal Reserve cut short-term interest rates over the summer and hinted that more cuts were to come. That helps real estate companies that benefit from lower borrowing costs. Lower rates also make dividend yields on REITs more attractive. And although rates are headed lower because of worries about the economy, for now at least, the economy is still growing—and REITs are thriving. Since the start of 2019, the average real estate fund has gained 22.3%. By contrast, Standard & Poor’s 500-stock index is up 17.8%.

Still, at TIAA-CREF Real Estate Securities (symbol TIRHX), managers David Copp and Brendan Lee are getting defensive. “We’re in the longest economic expansion in history, but it’s going to end, and we keep that in mind,” says Copp. He and Lee are loading up on REITs that tend to hold up better in bad times, such as warehouses, manufactured housing and wireless cell-phone towers. They’re avoiding those that may be vulnerable in a recession, such as hotels.

Copp’s favorite warehouse REIT these days is Rexford Industrial Realty, which owns more than 175 properties in Southern California. At the end of 2018, its biggest tenants included FedEx and Tesla. Rexford is benefiting from growing demand for its facilities in an area of limited warehouse supply. Over the past 12 months, the stock has climbed 35.7%.

Most stocks are measured by their earnings potential; REITs are measured by the cash flow generated from operations, known as funds from operations, or FFO. Copp and Lee favor firms with above-average cash-flow growth. They also look for REITs with below-average capital expenditures (money spent to acquire or maintain property or land). Generally, a warehouse has lower capital expenses than a hotel, says Copp.

The fund managers usually hold a REIT for three years, compared with the one-year period typical of the average real estate fund. Most fund managers talk about having a long-term view, says Copp, but some focus more on the short term than they admit.

Over the past decade, the fund has beaten 84% of its peers on an annualized basis, with a 13.6% return. Fees are below average, too, at 0.81%.

Mutual funds almost go hand-in-hand with retirement investing. And why not? The modern mutual fund predates exchange-traded funds (ETFs) by more than six decades. Most 401(k) plans hold nothing but mutual funds. So it’s reasonable to link one with the other.

But don’t sleep on exchange-traded funds. As you’ll soon find out, while many of the best ETFs out there are tactical strategies and great trading vehicles, some of them are dirt-cheap, long-term buy-and-hold dynamos that can give investors what they need in retirement: diversification, protection and income.

Many (though not all) ETFs are simple index funds – they track a rules-based benchmark of stocks, bonds or other investments. It’s an inexpensive strategy because you’re not paying managers to analyze and select stocks. And it works. In 2018, the majority of large-cap funds (64.5%) underperformed Standard & Poor’s 500-stock index – the ninth consecutive year that most of them failed to beat the benchmark.

Today, we’ll look at seven of the best ETFs for retirement. This small group of funds covers several assets: stocks, bonds, preferred stock and real estate. Which ones you buy and how much you allocate to each ETF depend on your individual goal, be they wealth preservation, income generation or growth.

Data is as of Aug. 28. Yields represent the trailing 12-month yield, which is a standard measure for equity funds.

• Type: U.S. dividend stock
• Market value: $24.3 billion
• Dividend yield: 3.2%
• Expenses: 0.06%

The conventional wisdom used to be that you should subtract your age from 100 to determine how much of your portfolio should be allocated to stocks. At age 50, you would be 50% in equities; by age 70, that would have dropped to 30%. Easy peasy.

In recent years, however, that rule has been kicked to the curb, and financial experts increasingly suggest hanging on to more of your stocks later in life. Why? Americans are living longer – a lot longer. Men’s average life expectancy has shot up from 67.1 years in 1970 to 76.1 years as of 2017. For women, it has jumped from 74.7 in 1970 to 81.1 years as of 2017.

And those are just averages. Reaching your 90s and even triple digits is a realistic scenario, which means your retirement funds may need to last decades longer than they once did.

• Vanguard High Dividend Yield ETF (VYM, $85.22) is a conservative way to remain in stocks during retirement. This is a broad collection of more than 400 mostly large-cap stocks that feature higher yields than their peers. Most of the top holdings are well-known for their dividends – Johnson & Johnson (JNJ), Exxon Mobil (XOM) and Procter & Gamble (PG) are among the numerous Dividend Aristocrats in the group.

VYM is a “conservative” stock fund because of its strategy. The Vanguard S&P 500 Index (VOO), for instance, is a blend of both growth and value, getting some of its returns from a modest yield (currently 1.9%) and price appreciation. Vanguard High Dividend Yield is more value- and dividend-oriented, sacrificing potential price growth for more substantial income generation.

Learn more about VYM at the Vanguard provider site.

• Type: International developed-market stock
• Market value: $57.5 billion
• Dividend yield: 3.1%
• Expenses: 0.31%

It’s vital to diversify your portfolio simply because no investment “works” all the time. Mark Pruitt, investment adviser representative with Strategic Estate Planning Services, wrote earlier this year for Kiplinger about the importance of geographic diversification – owning stocks from other countries – as exemplified by a mid-year 2018 report from Sterling Capital Management LLC:

“The report shows from 1998 to 2017 that 50% of the time the S&P 500 outperformed the international markets and the other 50% of the time the international markets outperformed the S&P 500.”

Enter the iShares MSCI EAFE ETF (EFA, $62.42).

The “EAFE” stands for “Europe, Australasia and Far East” and refers to so-called developed economies in those regions. Developed economies are typically highly industrialized, economically mature and have (relatively) stable governments.

EFA is one of the best ETFs you can hold for this kind of exposure. It’s a basket of more than 900 large-cap stocks from a dozen such countries, including Japan (24.3% of the portfolio), the United Kingdom (16.1%) and France (11.3%).

Many of these are multinational corporations you’ve probably heard of: Swiss foods giant Nestle (NSRGY), Japanese automaker Toyota (TM) and British energy giant BP plc (BP) dot this ETF’s top holdings. And while it’s a blended fund (both growth and value), many of these large-caps yield more than their American counterparts, leading to a much more substantial annual dole than the S&P 500.

Learn more about EFA at the iShares provider site.

• Type: All-world stock
• Market value: $16.5 billion
• Dividend yield: 2.3%
• Expenses: 0.09%

The Vanguard Total World Stock ETF (VT, $72.64) is one of the best ETFs to buy for the truly spartan investor – someone who wants quite literally a whole world of stock holdings without having to buy four or five funds to get it.

In fact, our Steven Goldberg calls VT “the only stock index fund you’ll ever need.”

Vanguard Total World Stock ETF puts roughly 8,200 stocks at your fingertips from all reaches of the planet. America? Check. Developed markets? Check. It even has a decent allocation of about 10% of its assets in emerging markets – higher-growth though sometimes less sturdy economies such as China and India.

About 56% of the portfolio is invested in U.S. stocks; in fact, only one non-U.S. company (Nestle) makes the top 10 holdings. After that, there are decent-size holdings in countries such as Japan (7.5%), the United Kingdom (5.0%) and China (3.2%), but it has holdings in dozens of other countries, including small allotments to the Philippines (0.2%), Chile (0.1%) and Qatar (0.1%).

VT is a true one-stop shop for equities, it’s extraordinarily cheap for what it provides, and for now, it yields a little more than the broader U.S. market.

Learn more about VT at the Vanguard provider site.

• Type: Real estate
• Market value: $2.4 billion
• Dividend yield: 2.5%
• Expenses: 0.34%

Real estate investment trusts (REITs) are a slightly different critter than traditional stocks. These are a creation of Congress that came to life in 1960 specifically to give everyday investors access to real estate. It’d be difficult for most people to round up the millions of dollars it would take to buy and lease out, say, an office building or a strip mall. But just about any retail investor can shell out a few hundred bucks for some shares.

REITs are helpful to retirement investors for a pair of reasons. For one, REITs by their very design are obligated to pay out at least 90% of their taxable profits as dividends to shareholders. As a result, real estate tends to be among the top-yielding market sectors, and a great source of income for retirees.

Also, real estate tends to be uncorrelated with U.S. stocks – in other words, they don’t always move the same way, which means REITs sometimes perform well when U.S. stocks don’t. That’s a benefit of diversification. Ben Carlson, over at A Wealth of Common Sense, showed that from 1978 through July 2018, a 75%-25% blend of the S&P 500 and a REIT index outperformed each index individually. “This is not an enormous improvement by any means,” he writes, “but combining the two assets saw higher returns than the REIT index and lower volatility than the S&P.”

The iShares Cohen & Steers REIT ETF (ICF, $118.06) is one of the best ETFs for this purpose – and one that we’ve focused on before when seeking out funds for market crash protection. It blends the expertise of real estate specialist Cohen & Steers with the scale of iShares (which allows it to charge relatively lower fees).

This tight 30-stock portfolio invests in the dominant players in a number of different property types. American Tower (AMT) provides the telecommunications infrastructure that the U.S. and several other countries need to keep our smartphones connected. Welltower (WELL) is a leader in senior housing and assisted living real estate. And Public Storage (PSA) … obviously, the name says it all.

A curious note about ICF is that it yields less than most other REIT ETFs. But its emphasis on high quality delivers superior price performance that makes it a total-return winner over most time periods.

Learn more about ICF at the iShares provider site.

• Type: Intermediate-term bond
• Market value: $234.7 billion
• SEC yield: 2.3%*
• Expenses: 0.035%

Bonds – debt issued by numerous entities, from the U.S. government to giant corporations to small municipalities – have a place in many portfolios, especially retirement accounts. That’s largely because they dole out fixed distributions that retirees can rely on as income.

And again, it helps to have another uncorrelated asset. From Kiplinger’s Eleanor Laise:

“For retirees, bond funds should generally act as ballast, helping you withstand market volatility and giving you stable assets to tap when your stock holdings are down.”

Why bond funds, instead of individual bonds? Well, for one, they’re more difficult to research than many stocks, and the media barely covers them, so it’s not easy to know which individual debt issues to purchase. A bond fund takes that responsibility off your plate, and you get the added bonus of defraying risk by spreading it across hundreds if not thousands of bonds.

The Vanguard Total Bond Market ETF (BND, $85.16) is a bargain-basement ETF that holds more than 8,600 bonds. It’s considered an “intermediate-term” bond fund with an average duration of six years. (Duration is a risk measure for bonds; it essentially means that a one-percentage-point increase in interest rates will result in a 6% decline for the fund.)

BND invests across numerous types of debt – Treasuries (44.0%), corporate (26.8%) and government mortgage-backed securities (21.8%) make up the lion’s share, though it has sprinklings of corporate mortgage-backed and even foreign bonds. And all the debt it holds is “investment-grade,” which means the major credit agencies perceive all of these to have a high likelihood of being repaid.

Also, thanks to an expense drop this year, BND is now the lowest-cost U.S. bond ETF on the market.

*SEC yield reflects the interest earned after deducting fund expenses for the most recent 30-day period and is a standard measure for bond and preferred-stock funds.

• Type: Ultra-short-term bond
• Market value: $9.1 billion
• SEC yield: 1.9%
• Expenses: 0.1359%

Money market funds are primarily designed to protect your assets and earn you a tiny bit on the side. These funds invest in high-quality, short-term debt such as Treasury notes and certificates of deposit. They don’t yield much, but they’re low on risk, making them an ideal hidey hole during turbulent markets.

There are only a handful of money market ETFs, but the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL, $91.58) is a solid and inexpensive choice among the higher-asset options.

You won’t find many smaller ETF portfolios out there. BIL holds just 15 extremely short-term Treasury debt issues ranging from 1 to 3 months at the moment, with an average adjusted duration of just 29 days.

How stable is this fund? Over the past decade, the gap from its highest point to its lowest point is a mere three-tenths of a percent. All it takes is a quick look at the chart to see the evident upsides and downsides of a fund like this.

BIL data by YCharts

You’ll miss out on any bullishness in the market, but your money will barely budge, no matter how dramatic the downturn.

Learn more about BIL at the SPDR provider site.

• Type: Preferred stock
• Market value: $675.7 million
• SEC yield: 5.4%
• Expenses: 0.41%

Preferred stocks have long been called a “hybrid” security that blends various aspects of common stocks and bonds. For instance, preferred stock does actually represent ownership in a company, like a common stock … but it usually doesn’t have voting rights, which bondholders lack too. Preferred stocks pay out (typically high) dividends that are often taxed as “qualified” dividends like many common-stock payouts … but these dividends often are fixed at a specific rate, much like a bond’s coupon.

From a practical standpoint, preferred stocks are an income play. They offer well-above-average yields often between 5% and 7%. But they typically don’t move much in either direction – if a company reports explosive earnings, its common stock might shoot higher, but its preferreds might barely budge.

This conservative, income-focused nature makes preferred stocks appealing to retirement portfolio. The VanEck Vectors Preferred Securities ex Financials ETF (PFXF, $20.13) is one of the best ETFs to buy to collect this kind of income.

Following the 2007-09 bear market and financial crisis, numerous “ex-financials” ETFs popped up in response to the beating banks took and the subsequent distrust that generated. PFXF, introduced in 2012, was one of them. Whereas most preferred-stock funds have large allocations to financial-sector preferreds, VanEck’s ETF eschews those, instead investing in preferred securities from utilities, REITs and telecoms, among other areas of the market.

Honestly? PFXF’s ex-financial nature isn’t really here nor there anymore. Banks are far better capitalized and regulated now than they were in 2007, so the risk of another near-collapse doesn’t seem as dire. But the reason PFXF’s 120-stock portfolio still holds up is its combination of higher-than-average yield and one of the lowest expenses in the space.

* Includes a four-basis-point fee waiver.

Learn more about PFXF at the VanEck provider site.

The stock market took a gut punch recently as a number of on-again, off-again headwinds started to blow at the same time. Investors quickly turned tail, seeking out more protective positions. Unsurprisingly, this trend led to an influx of inflows into some of the best defensive exchange-traded funds (ETFs).

The Federal Reserve knocked Wall Street off-balance with a recent quarter-point drop in its benchmark Fed funds rate. Yes, it was the first such cut since the Great Recession. But some investors were hoping for a deeper reduction, and Fed Chairman Jerome Powell’s subsequent press conference kept experts guessing about whether future rate cuts were any more or less likely.

The U.S.-China trade war escalated next. At the start of August, President Donald Trump threatened to slap a 10% tariff on another $300 billion in Chinese imports effective Sept. 1, prompting Beijing to threaten retaliation. So far, China has announced it will suspend imports of U.S. agricultural products and let its currency, the yuan, tumble to an 11-year-low. The latter move is expected to agitate Trump, who has accused Beijing of currency manipulation in the past.

Standard & Poor’s 500-stock index dropped quickly, losing almost 4% between the July 30 close (the day before the Fed announcement) and the Aug. 5 market open. Some investors are going to cash – but others are seeking out areas of the market that might rise as the market falls, or places to collect dividends while waiting out the volatility.

Here, we examine 11 of the best ETFs to buy if you’re looking for portfolio protection. This relatively small cluster of funds covers a lot of ground, including high-dividend sectors, low-volatility ETFs, gold, bonds and even a simple, direct market hedge.

Data is as of Aug. 4. Dividend yields represent the trailing 12-month yield, which is a standard measure for equity funds.

• Type: Sector
• Market value: $10.1 billion
• Dividend yield: 3.1%
• Expenses: 0.13%, or $13 annually on a $10,000 investment

Whenever you read about the markets having a rough day, look at how different sectors performed. Often, you’ll see heavy losses in certain aggressive, high-growth sectors (think technology or consumer discretionary/services). But other sectors – especially those that traditionally offer high yields – may experience lighter losses, sometimes even gains on those days, because investors flock to the protection their businesses and dividend payments offer.

Utility stocks – companies that provide electricity, gas and water service, among others – are one such sector. There’s little growth in these firms. They’re highly regulated, so they can’t just jack their prices significantly higher overnight, and because they’re regional in nature, they can’t rapidly heap on new customers.

But they provide necessities that people must use no matter how bad the economy gets, and as a result, they have extremely reliable revenue streams that translate into predictable profits. And those profits often are returned to shareholders in the form of above-average dividends. The combination of these two factors makes utility stocks attractive when the rest of the market quivers.

The Utilities Select Sector SPDR Fund (XLU, $60.15) provides access to a tight cluster of the 28 utility companies in the S&P 500. Because the fund is weighted by market value (the biggest firms make up the biggest portions of the portfolio), it is very heavily invested in a few stocks. Largest holding NextEra Energy (NEE), for instance, accounts for more than 12% of the ETF’s assets, and the top five holdings alone account for roughly 40%. That means significant moves in just one or two of these stocks can have an outsize effect on XLU’s performance.

The upside? Utility stocks as a whole tend to be more stable than the broader market anyway. And they certainly are more income-friendly – XLU’s current 3.1% yield easily trounces the 1.8% you’ll get by investing in S&P 500 ETFs such as the SPDR S&P 500 ETF (SPY).

Learn more about XLU at the SPDR provider site.

• Type: Sector
• Market value: $12.3 billion
• Dividend yield: 2.7%
• Expenses: 0.13%

Just like you need utilities such as gas to heat your home and water to drink and stay clean, you also need a few goods to get you through the day – food and basic hygiene products among them.

That’s what consumer staples are: the staples of everyday life. But while some are what you’d think, others aren’t. Bread, milk, toilet paper, toothbrushes are obvious basics, though consumer staples also tend to include things such as tobacco and alcohol – not needs, per se, but they’re consumed like it. Thus, like utilities, consumer staples tend to have somewhat more predictable revenues than other sectors, and also pay out decent dividends.

The Consumer Staples Select Sector SPDR Fund (XLP, $59.23) invests in the 30-plus consumer staples stocks of the S&P 500 – a who’s who of the household brands you’ve grown up with and know. Top holding Procter & Gamble (PG, 16.2% of assets) is responsible for Bounty paper towels, Charmin toilet paper and Dawn dish soap. Coca Cola (KO) and PepsiCo (PEP) – the latter of which also boasts Frito-Lay, a massive snacks division – combine to make up another 20% of assets.

And you must buy those products somewhere, which explains the inclusion of companies such as Walmart (WMT) and Costco (COST).

The Consumer Staples SPDR has long been among the best ETFs to buy, from a sector standpoint, in market downturns. It proved its mettle during the bear market of 2007-09, when it delivered a total return (which includes price and dividends) of -28.5%, which was only half as bad as the S&P 500’s 55.2% loss. Or consider 2015, when the S&P 500 returned just 1.3% versus 7% for the XLP. The ETF also outperformed during the fourth-quarter slump in 2018.

You can partly thank its consistently above-average yield, which currently sits at 2.7%.

Learn more about XLP at the SPDR provider site.

• Type: Sector
• Market value: $2.3 billion
• Dividend yield: 2.5%
• Expenses: 0.34%

The last sector we’ll look at here involves real estate investment trusts (REITs). Congress created this corporate structure almost 60 years ago to encourage property investment among mom ‘n’ pop investors – the type of people who couldn’t afford to just buy an office building or two with couch change.

REITs own and sometimes operate properties of all sorts: the aforementioned offices, sure, but also apartment buildings, malls, self-storage units, warehouses, even driving ranges. And they were built with income in mind. These companies must pay out 90% of their taxable income as dividends to shareholders – a quid pro quo for being exempt from federal taxes.

• iShares Cohen & Steers REIT ETF (ICF, $115.17) tracks an index built by Cohen & Steers, which calls itself the world’s first investment manager dedicated to real estate securities.” The result is a portfolio of 30 larger-sized REITs that “are dominant in their respective property sectors.” American Tower (AMT, 8.7%), for instance, is a top provider of telecommunications infrastructure, which it leases out to the likes of Verizon (VZ) and AT&T (T). Prologis (PLD, 8.2%) owns 786 million square feet of logistics-focused real estate (such as warehouses) and counts Amazon.com (AMZN), FedEx (FDX) and the U.S. Postal Service among its customers.

REITs – much like utilities – also feature another mutual benefit: Their businesses tend to be mostly concentrated within America’s borders, which insulates them somewhat (though not entirely) from trade friction.

One final note about ICF: Its yield of 2.5% is smaller than many other REIT ETFs. However, its capital gains are typically so consistently strong that even once its inferior dividend is included, it outperforms most rivals.

Learn more about ICF at the iShares provider site.

• Type: Low volatility
• Market value: $30.7 billion
• Dividend yield: 1.8%
• Expenses: 0.15%

Low-volatility ETFs are considered among the best ETFs for environments like the current one because they’re designed to keep you exposed to stock-market upside while reducing risk. Just know what to expect: They typically underperform during bull moves and outperform during downturns.

The iShares Edge MSCI Min Vol USA ETF (USMV, $62.59) is the largest low-vol ETF on the market, and one of two volatility-suppressing options in the Kiplinger ETF 20 list of high-quality, low-cost funds. USMV targets stocks with “lower volatility characteristics relative to the broader U.S. equity market.”

Here’s how the sausage is made: USMV looks at the top 85% (by market cap) of U.S. stocks that have lower volatility compared to the rest of the market. It then uses a multi-factor risk model to weight the stocks. The portfolio is refined further by an “optimization tool” that looks at the projected riskiness of securities within the index.

This portfolio can fluctuate a lot over time. For instance, in late 2018, USMV was nearly 20% invested in tech stocks and 15.4% invested in health care. Today, IT is 16.6% and health care 10.9%. Also, don’t mistake “minimum volatility” for “lack of growth.” The ETF’s top holdings include Visa (V) and McDonald’s (MCD), both of which have sprinted past the broader market and hit all-time highs within recent weeks.

Learn more about USMV at the iShares provider site.

• Type: Low volatility
• Market value: $702.3 million
• Dividend yield: 3.5%
• Expenses: 0.27%

The Legg Mason Low Volatility High Dividend ETF (LVHD, $32.10) provides an ideal mixture of the low-volatility factor and high dividend yield.

Essentially, it’s a 1-2 punch of portfolio protection.

Low volatility swings both ways. Sometimes, being more volatile than the market can mean you’re generating more upside, so reducing volatility can limit gains. But if you can reduce volatility via stocks that deliver substantial income, you can make up some of the price difference.

LVHD accomplishes this by scanning a universe of 3,000 stocks that screens for companies that pay “relatively high sustainable dividend yields,” then scoring them based on price and earnings volatility. Every time the fund rebalances, a stock can account for a maximum of 2.5% of assets, and no sector can be larger than 25% (except REITs, which can’t exceed 15%). Just note that’s at rebalancing – as stocks rise and fall in between adjustments, those percentages can rise and fall, too.

Legg Mason’s ETF typically holds between 50 and 100 stocks. Right now, it has 79 holdings that are most concentrated in utilities (25.7%), followed by REITs (16.0%) and consumer staples (13.9%) – a blend that shouldn’t surprise you if you’ve been reading closely so far. Top 10 holdings include P&G, telecom REIT Crown Castle (CCI) and utility American Electric Power (AEP).

Learn more about LVHD at the Legg Mason provider site.

• Type: Low volatility
• Market value: $2.0 billion
• Yield: 2.7%
• Expense ratio: 0.25%

Small-cap stocks rarely are recommended as a way to hedge against an uncertain market. Sure, they have enormous growth potential, but they’re also high on risk – and when investors are scared, they tend to ditch risk.

The Invesco S&P SmallCap Low Volatility ETF (XSLV, $47.92) lets you have your cake and eat it too.

XSLV invests in the 120 least volatile stocks with the S&P SmallCap 600 Index. The portfolio is compiled not by market value, but by low volatility scores. It also reconstitutes more frequently than some other funds – quarterly, rather than semi-annually, so it’s better able to weed out companies that might have succumbed to a higher level of volatility.

Per Kiplinger’s Nellie Huang, who recently analyzed the fund as part of its inclusion in the Kip ETF 20: “Invesco S&P SmallCap Low Volatility is designed to smooth out the ride. So far, so good: Since this ETF launched in early 2013, it has outpaced two small-company stock benchmarks – the Russell 2000 and the S&P SmallCap 600 – on an annualized basis, with less volatility.”

XSLV is lopsided from a sector standpoint, however, with a whopping 44% of its portfolio invested in financials and almost another quarter of the fund in real estate. But these concentrations, especially in REITs – including top holdings Apollo Commercial Real Estate Finance (ARI) and Redwood Trust (RWT) – results in a yield of 2.7% that’s significantly fatter than the 1.6% generated by the Russell 2000 small-cap index.

Small-cap stocks also can provide some insulation from international troubles, given that often, most if not all their revenues are generated domestically.

Learn more about XSLV at the Invesco provider site.

• Type: Commodity (Gold)
• Market value: $566.0 million
• Dividend yield: N/A
• Expenses: 0.1749%

Gold is a popular flight-to-safety play that can get a lift from several sources. Part of it is just a worst-case-scenario fear: If global economic structures come crashing down and paper money means nothing, humans still will assign some worth to the shiny yellow element that once was a currency, regardless of its limited practical use compared to other metals.

Of course, at that point, you’re probably not thinking about your IRA.

But gold also is an uncorrelated asset that doesn’t move perfectly with or against the stock market. It’s often considered a hedge against inflation. It tends to go up when central banks unleash easy-money policies. Because gold itself is priced in dollars, weakness in the U.S. dollar can make it worth more. So sometimes, it pays to make shorter-term bets on the metal.

If you don’t want to go through the hassle and cost of having gold bars or coins delivered, finding somewhere to store them, insuring them, then having to find a buyer and a way to unload them when you want to exit your “position,” consider one of the many ETFs that trade based on the worth of actual gold stored in vaults.

Each GraniteShares Gold Trust (BAR, $128.83) unit represents 1/100th of an ounce of gold. And with a 0.1749% expense ratio, it’s the second-cheapest ETF that’s backed by physical gold. First is Aberdeen Standard Physical Swiss Gold Shares ETF (SGOL), which in late 2018 undercut GraniteShares at a flat 0.17% – yet another salvo in what has been an aggressive fee war in the space.

But BAR has other incentives, including a low spread that’s attractive to traders, and an investment team that’s easier to access than those at larger providers.

Learn more about BAR at the GraniteShares provider site.

• Type: Gold stocks
• Market value: $11.3 billion
• Dividend yield: 0.4%
• Expenses: 0.52%

Gold mining stocks are a mix of commodity and equity – they’re publicly traded companies that have revenues and earnings, but their fates are largely dictated by the motion of the yellow metal.

You see, gold miners have a calculated cost of extracting every ounce of gold out of the earth. Every dollar above that is profit in their pockets. Thus, the same pressures that push gold higher and pull it lower will have a similar effect on gold mining stocks.

The VanEck Vectors Gold Miners ETF (GDX, $27.77) is among the best ETFs for this purpose. It’s the largest gold mining ETF, at more than $11 billion in assets, and it’s pretty straightforward. The fund holds more than 40 stocks that engage in the actual extraction and selling of gold. (VanEck has a sister fund, GDXJ, that invests in the “junior” gold miners that hunt for new deposits.)

But why gold miners instead of gold itself?

Gold stocks sometimes act in a more exaggerated manager – that is, when gold goes up, gold miners tend to gain by even more. For example, gold itself has had a phenomenal 2019, with the aforementioned BAR returning 12.3% year-to-date. The GDX, however, is up almost 32%, surging when gold climbs and slumping on even slight weakness in the metal.

Learn more about GDX at the VanEck provider site.

• Type: Bond
• Market value: $16.8 billion
• SEC yield: 1.8%*
• Expenses: 0.15%

The iShares 1-3 Year Treasury Bond ETF (SHY, $84.68) is, to be blunt, boring. It’s a basic index fund that currently invests in a basket of more than 80 U.S. Treasury bonds with an average effective maturity (the amount of time until a bond’s principal is paid in full) of just less than two years.

These bonds are a safe bet, given that two of the three major credit providers give American debt the highest possible rating. The short maturity helps, too, because it tamps down on the risk of interest rates rising quickly, thus making SHY’s current holdings less attractive.

Safe bets typically don’t pay much, of course, but these aren’t typical times. SHY’s current yield of just under 1.8% is only a few basis points (one one-hundredth of a percent) less than the riskier iShares 7-10 Year Treasury Bond ETF (IEF), whose weighted average maturity is more than four times longer.

SHY rarely moves much. Over the past five years, the fund has traded in a range of about 3% from its highs to its lows. So in good times, the S&P 500 usually crushes short-term bonds. But the prospect of getting a 1.8% yield without worrying much about hemorrhaging capital losses sounds pretty good versus staying fully invested in equities during a correction or bear market.

Learn more about SHY at the iShares provider site.

* SEC yield reflects the interest earned for the most recent 30-day period after deducting fund expenses. SEC yield is a standard measure for bond funds.

• Type: Low-volatility bond
• Market value: $62.3 million
• SEC yield: 4.1%**
• Expenses: 0.40%

The IQ S&P High Yield Low Volatility Bond ETF (HYLV, $23.66) blends a few of the themes we’ve discussed here. You’re avoiding exposure to the stock market via bonds, you’re leaning on high income to lift returns and you’re seeking out low volatility to minimize losses.

The HYLV tries to find a middle ground where you can enjoy the high yield of below-investment-grade (“junk”) bonds while trying to mitigate their relatively high risk. The underlying index selects bonds using a calculation that factors in the bond’s duration (a measure of its sensitivity to interest rates), the bond’s spread (the difference between its yield and a similar-maturity U.S. Treasury bond’s yield) and the spread of the broader universe of bonds that the fund is selecting from.

The result shouldn’t surprise anyone: Eighty-three percent of HYLV’s debt portfolio is in the highest-quality junk tier (BB), with about 26% total in the absolute highest non-investment-worthy grade, BB+. The rest is in B-rated debt, as of the ETF’s most recent fact sheet – none is in CCC or lower.

You’re bringing in less income (4.1%) than what you’ll get from junk mainstays such as the SPDR Bloomberg Barclays High Yield Bond ETF (JNK) and iShares iBoxx $ High Yield Corporate Bond ETF (HYG), both of which yield more than 5%. But HYLV’s movements tend to be less drastic, giving you more peace of mind.

Learn more about HYLV at the New York Life provider site.

** SEC yield data for HYLV is as of June 30. Morningstar data for SEC yield was not available at time of writing.

• Type: Inverse stock
• Market value: $1.9 billion
• Dividend yield: N/A
• Expenses: 0.89%

While all the following ETFs are certainly among the best ETFs to own if you’re looking for protection, none are inherently as crash-proof as the ProShares Short S&P500 ETF (SH, $26.71).

In fact, the best-case scenario for SH is a market crash.

The ProShares Short S&P500 ETF is a complex machine of swaps and other derivatives (financial instruments that reflect the value of underlying assets). But what it provides investors is simple: the inverse daily return (minus fees) of the S&P 500 Index. In short, if the S&P 500 loses 1%, the SH should gain 1%. Reality bears this out: Look at any chart of the ProShares Short S&P500 ETF, and you’ll see a virtual mirror image of the S&P 500.

SH is best used as a simple market hedge. If you’re scared of a market correction or worse, you could abandon all your stocks – but you’d rack up a ton of trading fees, not to mention potentially lose out on high yields-on-cost of established dividend positions. Or, you could stay mostly long but allocate a small percent of your portfolio to SH. That way, if the rest of your stocks go down, chances are SH is at least countering some of those losses, and you’re also not absorbing all those trading fees.

The risk is easy to see: If the market goes up, SH will muffle some of your gains.

Be warned: More aggressive “leveraged” inverse ETFs provide double or even triple this kind of exposure, be it on the S&P 500 or even sectors and industries. But you also risk double or triple the losses – far too much risk for your typical buy-and-hold, retirement-minded investor. A small hedging position in SH, however, is manageable and won’t crack your portfolio if the bulls do in fact win out.

Learn more about SH at the ProShares provider site.

Stocks aren’t all that different than cars, in some ways. Sure, the Ferrari is a lot of fun to drive, and you look cool sitting behind the wheel. But it’s also going to cost you a fortune, and high-performance cars spend a lot of time at the mechanic’s shop.

Now, compare that to a Honda Civic. You never really notice a Honda Civic on the road. It’s utterly forgettable. But it’s also just about indestructible, requires virtually no attention from you, and it quietly and efficiently does its job.

Consider that mentality when you’re tracking down stocks to buy. A highflying growth pick can be a lot of fun to own. You look smart owning it, and it’s fun to talk about at parties. But when the market’s mood swings the other way, you’re often left with some nasty losses and a bruised ego. Meanwhile, that dividend-paying value stock in your portfolio might not be particularly interesting. But over the long haul, it’s a lot less likely to give you problems. Like that Honda Civic, it will quietly do its job with no stress and no drama.

“Some of our most profitable trades over the years have been some of our most boring,” explains Chase Robertson, principal of Houston-based RIA Robertson Wealth Management. “We’ve done well for our clients by mostly avoiding the trendy sectors and focusing instead on value and income.”

Here are 11 boring but beautiful dividend stocks to buy now. They might not be much to look at, but they’re likely to get the job done over the long term. And when you need them most – in retirement – they’ll be less likely to break down on you.

Data is as of July 29. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.

• Market value: $54.1 billion
• Dividend yield: 3.5%

You could invent the next viral iPhone app and make millions. But let’s face it: That’s not likely. You also could make millions investing in the stock of a company that makes the next viral iPhone app. But again, not likely. By the time you know about the app, chances are good the stock has already made its run.

Rather than play the guessing game of who will make the next killer phone or the next killer app, why not invest in the trend that makes phones and apps so lucrative?

We all know that mobile data usage is only likely to increase in the years ahead. Buying cell towers gives you a piece of that action, and Crown Castle International (CCI, $130.16) is one of the largest independent owners of cell towers and other telecom infrastructure. This real estate investment trust (REIT) owns, operates and leases more than 40,000 towers and around 70,000 miles of fiber optic cable.

Is it exciting? Absolutely not. But it’s one of those businesses that provides critical infrastructure for the modern economy, and it does so largely behind the scenes.

Crown Castle, as a REIT, is required to pay out at least 90% of its taxable profits out as dividends to shareholders. So like many REITs, it outyields the market (1.9%) with a respectable 3.5%. Moreover, CCI has improved its dividend every year since 2014; over the past five years, that payout has grown a cumulative 221%.

• Market value: $250.9 billion
• Dividend yield: 5.9%

Staying on the telecom theme, AT&T (T, $34.34) has been a boring play for many years now. Even its seemingly transformative recent buyout of Time Warner (which owns HBO, Cinemax, TBS and TNT) was a drawn-out affair that got bogged down in court battles.

It seems almost silly now, but in the late 1990s and early 2000s, AT&T was a bubble stock. Investors couldn’t get enough of everything related to telecommunications, and AT&T delivered the goods. But when the bubble burst, AT&T crashed hard. Today, nearly 20 years after the peak of the internet mania, T shares still are more than 40% below their old highs.

Of course, 20 years later, AT&T is a very different company. Its mobile and home internet businesses are mature, and its paid TV business is actually shrinking, albeit slowly. AT&T is essentially a utility stock. But T belongs on any short list of boring stocks to buy now given its current pricing.

AT&T took a tumble in 2018 that brought it to its most attractive prices in recent memory. The stock has recovered somewhat, but not completely, and still offers a value at less than 10 times analysts’ expectations for future profits, and a fat dividend yield of 5.9%.

Are you going to get monster growth from AT&T? Of course not. But modest capital appreciation and high levels of income should deliver a very respectable total return.

• Market value: $94.1 billion
• Dividend yield: 6.4%

“Beautiful” and “tobacco” are two words you rarely see in the same sentence. Big Tobacco is an ugly business, and there’s really no reason to pretend otherwise.

Tobacco stocks, however, are the prototypical boring stock that you can still slot into your portfolio. They’re not trendy or glitzy. They’re about as far from cutting edge as you can get. And they’re essentially forbidden by law to advertise. They just quietly gush cash flow and pay it out to their shareholders as dividends.

This brings me to Altria Group (MO, $50.31). Altria markets the Marlboro and other cigarette brands in the United States. It also sells Copenhagen and other brands of chewing tobacco, as well as vaping products under the Juul brand, among other businesses.

Altria became grossly overvalued a few years ago as the global hunt for yield pushed investors toward dividend stocks. But the stock has been sliding for the past two years and is now very attractively priced for the first time in ages. Its forward P/E of roughly 11 is downright reasonable. And a dividend yield well north of 6.4% is difficult to turn down.

While its core businesses are boring, Altria has some things in the works that could pay off in spades. Altria is dabbling in the marijuana space via its investment in Cronos Group (CRON). If the race toward legalization picks up speed, Altria certainly would have the infrastructure in place for large-scale production.

So, Altria fits right in with other boring dividend stocks to buy … but it does have a potentially interesting future.

• Market value: $73.1 billion
• Dividend yield: 3.6%

The neighborhood pharmacy is hardly a scintillating stock story. It’s essentially a convenience store and a place for a mostly older clientele to pick up their medication. And in a world in which Amazon.com (AMZN) is quickly replacing neighborhood stores, the local pharmacy might seem simultaneously boring and risky.

All of that might be true. But CVS Health (CVS, $56.26) is more than just a pharmacy. It’s quietly evolving into a one-stop-shop for basic healthcare. The chain has been operating walk-in MinuteClinics for years, offering basic treatment, physicals and even vaccinations. And more recently, its HealthHUB concept is expanding CVS’s reach into healthcare, providing patients with full primary-care services, dietitians and even weight-loss programs. Under this new format, more than 20% of the store’s square footage is dedicated to health services as opposed to retail sales. And the company even went so far as to acquire health insurer Aetna back in 2018 – although, while the deal already closed, a U.S. district judge has yet to sign off on it.

Rather than compete with the likes of Amazon, CVS is choosing to play an entirely different game.

CVS is dirt-cheap, trading at less than eight times expected earnings and below 0.4 times sales. And its dividend yield, while at 3.5% isn’t exceedingly generous, is as high as it has been since the 1990s.

Wall Street isn’t particularly fond of CVS right now, as tech and social media are en vogue and retail is very much out of fashion. But CVS is quietly trying to make itself “Amazon-proof,” and patient investors are getting paid to wait for Wall Street to appreciate that.

• Market value: $3.6 billion
• Dividend yield: 9.6%
• Macquarie Infrastructure (MIC, $41.69) is the quintessential “NIMBY” stock.

NIMBY, of course, stands for “not in my backyard.” And when you see what Macquarie has in its investment portfolio, you’ll no doubt agree.

Macquarie’s International-Matex Tank Terminals (IMTT) division handles and stores bulk liquids such as petroleum, chemicals and vegetable oil. IMTT leases more than 48 million barrels' worth of storage capacity. This clearly is something you don’t want next to your house. But it’s the sort of boring-yet-critical service that underpins the economy.

Macquarie also has an Atlantic Aviation division that provides aircraft fueling services, plane de-icing, hangar rental and other aviation services. (No one wants to live next to an airport.) And finally, the company’s third major division is MIC Hawaii, which runs a regulated gas utility and a liquefied petroleum gas terminal in Hawaii.

MIC’s stock took a 40% beating in a single day in 2018 after the company reduced its dividend, and the stock price has been depressed ever since. Management did a poor job of telegraphing the dividend cut, undermining investor confidence.

But in the words of Warren Buffett, the secret to success in this business is to be “greedy when others are fearful.” Investors are afraid of Macquarie after its dividend cut, and it shows in the stock’s pricing. MIC trades for just 1.2 times book value and yields close to 10%.

• Market value: $65.0 billion
• Distribution yield: 5.9%*

On the theme of basic infrastructure, few companies are less exciting than a midstream pipeline operator. They don’t really do anything. Once a pipeline is built, there’s not much to be done other than basic maintenance. The pipeline moves oil and gas products from point A to point B. The operator collects a fee.

Simple.

But sometimes the best businesses are the simplest. And among pipeline operators, few can compete with Enterprise Products Partners LP (EPD, $29.70).

Enterprise Products is one of the very best operators in the midstream space, and with more than 49,000 miles of pipelines, it’s also one of the biggest. Enterprise Products also owns 260 million barrels of liquids storage capacity and 14 billion cubic feet of natural gas storage capacity.

Unlike many of its peers, Enterprise has always been conservatively managed, preferring to grow slowly and steadily. This enabled the company to survive the turmoil in the energy markets over the past five years with its distributions intact. Its more aggressive and more heavily indebted peers weren’t so lucky.

At current prices, Enterprise Products yields just shy of 6%, and the company has raised its distribution at a little more than 5% per year over the past decade. This isn’t a glamorous stock. But it’s consistent.

* Distribution yields are calculated by annualizing the most recent distribution and dividing by the share price. Distributions are similar to dividends but are treated as tax-deferred returns of capital and require different paperwork come tax time.

• Market value: $101.7 billion
• Dividend yield: 3.3%

It’s hard to find too many companies more boring than 3M (MMM, $176.76). It makes Scotch tape and Post-it Notes, for crying out loud.

Of course, 3M does quite a bit more than tape and sticky notes. They make everything from the reflective films that cover traffic signs to insulation for airplanes. But all of their products have a couple things in common. To start, they perform their functions mostly behind the scenes. Secondly, they are products that tend to get used up and get replaced. And finally, demand tends to be pretty inelastic. When you need them, you need them.

These are exactly the kinds of qualities you want to see when seeking out boring dividend stocks to buy.

MMM’s stock movement has been a little too exciting of late, however. Revenues and earnings growth have been sluggish in recent years, causing shares to lose almost a third of their value from their old 2018 highs. The flip side is, MMM now trades at a reasonable 17 times next year’s earnings, and its 3%-plus yield is at highs not seen in a decade.

• Market value: $8.6 billion
• Dividend yield: 8.2%

If you’ve ever worked in a corporate office, you’re probably familiar with Iron Mountain (IRM, $29.91). This REIT’s locked shredder containers are a fixture in practically every office building in America and in a fair amount of the rest of the world.

Iron Mountain is the global leader in secure document storage and destruction. The company serves more than 230,000 organizations globally and operates more than 1,400 facilities across approximately 50 countries.

Iron Mountain’s business seemed unassailable until electronic document storage went mainstream. But that doesn’t mean the company is at risk of obsolescence any time soon. Its legacy storage business continues to throw off a lot of cash flow, and Iron Mountain has been busily diversifying into data centers and into faster-growing emerging markets.

Meanwhile, Iron Mountain is among the highest-yielding of these boring stocks to buy, throwing off more than 8% annually. The REIT has raised its dividend every year since 2010 and expects more payout growth to come.

There is nothing interesting or exciting about document storage or shredding. But it’s a stable business, and Iron Mountain is the undisputed market leader.

• Market value: $22.2 billion
• Dividend yield: 3.9%

REITs are generally a sleepy corner of the market. But among these real estate owners, Realty Income (O, $70.18) is a particularly unexciting player.

Realty Income owns a vast portfolio of more than 5,800 retail properties spread across 49 states and Puerto Rico. But it doesn’t own flashy trophy properties. You won’t see many Fifth Avenue retail shops in Realty Income’s portfolio. You’re a lot more likely to find the local auto supply store or pharmacy. In fact, CVS Health Corporation, which was mentioned earlier, is one of its larger tenants. Other large tenants include Walgreens (WBA), 7-Eleven, Dollar General (DG) and LA Fitness.

While nothing in this world appears to be 100% Amazon-proof, Realty Income’s tenants come awfully close.

Over its life, Realty Income has been a dividend-compounding machine. It has delivered 588 consecutive monthly dividends and grown the payout at a 4.6% annualized rate since its 1994 IPO. Realty Income’s history of income growth is difficult to top – it has raised its dividend for 87 consecutive quarters and counting.

You probably won’t get rich buying Realty Income stock. But you’ll collect around 4% in current yield, paid monthly, and that dividend should grow at around 4% to 5% per year. That’s not a windfall, but it’s better than what you can get in the bond market unless you’re willing to take a lot more risk.

• Market value: $9.0 billion
• Dividend yield: 6.0%

Along the same lines, VEREIT (VER, $9.24) is another boring but beautiful REIT.

Like Realty Income, VEREIT is a retail landlord. And also like Realty Income, its leases are mostly “triple net,” which means tenants are responsible for all taxes, insurance and maintenance costs. VEREIT’s job is simply to keep cashing the rent checks.

VEREIT has a portfolio of around 4,000 properties containing a total of 94.7 million square feet, and it shares many tenants – including CVS, Walgreens, Dollar General and LA Fitness – with Realty Income.

VEREIT is a little riskier than Realty Income, however. Its largest tenant, at 5.4% of the total portfolio, is Red Lobster. The REIT’s once-higher concentration in the struggling restaurant chain weighed on it considerably, but it has been reducing its exposure. Moreover, VEREIT’s top 10 tenants collectively account for only 27% of its total portfolio, and it’s otherwise very well-diversified geographically.

However, because of its slightly higher risk profile, VEREIT – at a 6% yield – is priced to deliver stronger returns. Sure, we’re unlikely to see large dividend increases in the immediate future until the company works through some lingering legal issues stemming from an accounting snafu by the previous management team. But that’s OK. A 6% yield is attractive in a world in which the 10-year Treasury barely yields 2%.

• Market value: $7.7 billion
• Dividend yield: 2.0%

Elon Musk’s Tesla Motors (TSLA) makes beautiful cars that are technological wonders. Unfortunately, the company has never met a deadline it couldn’t break, and it hemorrhages cash. Tesla has yet to deliver a full year of profitability.

Musk’s vision of a world of self-driving, zero-emission electric vehicles is a noble one, and we should sincerely hope that it comes to pass. But it’s questionable whether Tesla still will be around to reap the rewards.

Most would-be gold miners that moved to California for the gold rush of the 1840s failed to strike it rich. It was the entrepreneurs selling pickaxes and other goods and services to the miners that really prospered. Along the same lines, if you’re looking to bet on the long-term success of electric vehicles, don’t buy a loss-making automaker. Instead, buy the one element that every electric vehicle needs for its battery: lithium.

• Albemarle (ALB, $73.09) is one of the world’s largest lithium producers, and company projections show global lithium demand growing at a compound annual growth rate of 21% between 2018 and 2025.

Lithium was a major growth story a few years ago due in no small part to the buzz surrounding Tesla. But a short-term supply glut caused the price of lithium producers to collapse. Albemarle today trades for barely half its old 2017 highs.

This short-term weakness looks like a buying opportunity. Demand for lithium should only increase as every major automaker steps up to compete with Tesla, and today you can buy the stock at 2016 prices.

Charles Sizemore was long CVS, EPD, IRM, MIC, MO, O, T and VER as of this writing.

With a “Tariff Man” in office, investors have been buffeted by volatility and uncertainty. Where will President Donald Trump’s tariffs land next? Sure, Mexico is off the list for now – but it’s clear that Trump favors the use of tariffs for more than just trade imbalances, which means anywhere on the map (including countries we’ve reached agreements with) is fair game for future trade wars.

Which means it’s important to consider stock picks not just based on the current tariff situation, but on the possibility that Europe, Mexico and other regions could become more problematic in the future.

Finding insulation from the tariff effect is trickier than it sounds. For instance, most publicly traded casual dining restaurants operate most of their restaurants in the U.S. Thus, catering to primarily American consumers insulates them, right? Unfortunately, no. A University of California at Davis study shows 43% of fruit and vegetables – everything from strawberries and watermelons to avocados and onions – come from Mexico.

Autos? More than 1,000 Chinese companies export parts to the U.S.; some U.S. firms already are switching their suppliers. Apparel? A lot of that textile work in China is going to, um, come out in the wash. Even utilities are tricky. Sure, their customers are almost entirely domestic. But many are converting to wind and solar power, and while those natural resources are American, many of the solar panels and wind turbines are not.

Tariffs have far more impact than just the products themselves, too. The U.S. has slid from the fifth-most popular destination for Chinese tourists to 10th, thus losing some share of the estimated $315 billion they spend overseas. When considering the trade war, the warnings were about industrial companies and semiconductor firms. Few were thinking about the lodging industry.

Here, then, are five stock picks with trade war safety in mind. They come from a handful of disparate industries that provide more insulation from current and future trade salvos than most.

Data is as of July 24. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.

• Market value: $140.6 billion
• Dividend yield: N/A
• Adobe (ADBE, $310.27) is a Wall Street darling. It’s an expensive darling, to be sure – at a price-to-earnings ratio pushing 60, it’s valued at roughly triple Standard & Poor’s 500-stock index. But with a five-year return of 325%, ADBE has delivered the goods. And with analysts projecting annual profit growth of more than 23% over the next half-decade, it’s poised to keep delivering.

Adobe provides software for creative professionals, consumers and enterprises. Its products are divided into three segments: Digital Media Solutions, Digital Marketing Solutions and Publishing. The company is best-known for its unique portfolio of software assets focused on its Creative Cloud, which allow both amateur and professionals to create and manage digital content. Most people will recognize tools such as Photoshop, InDesign and Dreamweaver. It also is well-positioned to benefit from the growing market for digital video content and advertising creation and management.

As a software company, tariffs won’t affect Adobe from an input-cost perspective. And while the company does generate about 40% of its revenues from overseas, those revenues are spread out across numerous countries. Moreover, almost 90% of Adobe’s revenues are subscription-based, meaning that even should some areas of its international base be temporarily tripped up by tense relations from a trade war, most of its sales should remain steady.

Also encouraging: Management typically beats conservative guidance for its quarterly and annual financial reports.

• Market value: $22.2 billion
• Dividend yield: N/A

Last October, we discussed health insurance stocks and how they profit by managing the federal government’s Medicare, Medicaid and other healthcare programs. This niche represents the perfect hedge against tariffs, as managing these programs is a service (requiring no imported materials), and a domestic service, at that.

The landscape has changed in that one of the health insurance stocks we recommended, Centene (CNC, $53.73), is acquiring another recommendation, WellCare Health Plans (WCG).

The merger, announced in late March, earned shareholders’ green light in June. It still must gain the approval of insurance regulators in a couple dozen states, but if it does, the deal is expected to close in the first half of 2020. Centene is paying roughly $17 billion in cash and stock, and the acquisition should yield $500 million in annual savings for the combined entity.

More importantly, the addition of WellCare to the Centene portfolio will grow the latter’s reach from 32 states to all 50. Further, WellCare is recognized as a leader in Medicare Advantage and Medicare Part D, bulking up Centene’s presence in these markets. Comparisons are hard to come by given the diversity and complexity of government healthcare programs. But the Centene-WellCare combination will create one of the largest managers of government-sponsored healthcare plans.

The play for Centene isn’t driven by M&A, per se, though the company is highly acquisitive. The opportunity rests mainly with the inexorable growth in healthcare spending. To wit, Medicare spending is projected grow 7.6% annually from 2020 through 2027, when it will reach $1.4 trillion. These figures demonstrate a large growing pie that Centene is well positioned to capitalize on.

Finally, CNC is off about 20% from its late 2018 highs and trades at just 11 times future earnings expectations. That makes now a constructive entry point if the rest of this bull case appeals to you.

• Market value: $53.7 billion
• Dividend yield: 3.5%

5G technology has gone from being on the horizon to being in the here and now. And cell-tower companies have gotten red-hot.

The two major players in the space are American Tower (AMT) and Crown Castle International (CCI, $129.21) – a pair of telecommunications infrastructure real estate investment trusts (REITs). The names are a little misleading, however – American Tower is global, while Crown Castle’s 40,000 towers are located here in the U.S.

While domestic operations provide a barrier against trade wars, those steel-and-fiber towers provoke a question about whether Crown Castle is exposed to tariffs. In the Byzantine world of steel tariffs, it’s difficult to know whether a beneficiary today won’t be a victim tomorrow. As for the miles and miles of fiber, it’s difficult to know where it comes from. We asked CCI, but they were mum. But for what it’s worth, the company’s regular reports don’t acknowledge any exposure to tariff issues.

The answer is likely that CCI is exposed to tariffs, but just barely. The approximately $1.6 billion in capital expenditures for towers for 2018 is just under 5% of the company’s total assets and about equal to depreciation that year.

One reason to like Crown Castle is the financial strength of its customers, which consists primarily of large carriers such as AT&T (T) and Verizon (VZ), which – except for Sprint (S) – carry investment-grade debt ratings. Those ratings specifically deal with their ability to pay back bonds, but they’re also a good proxy with which we can assess their ability to pay long-term leases. Just understand the concentration risks involved in this industry, which consists of few players.

Another reason to like Crown Castle: The major carriers are testing 5G systems. The deployment of 5G services means more towers, and more importantly higher rental rates, because these networks require more power and processing at tower sites. 5G still is in the green-shoots phase, but the spread of deployment is inevitable.

Lastly, as a REIT, Crown Castle is required to distribute at least 90% of its taxable income as dividends. And like many REITs, CCI is a dividend-growth machine. The company began doling out dividends at 35 cents quarterly in 2014; that payout now stands at $1.125.

• Market value: $72.9 billion
• Dividend yield: 0.7%
• Intuit (INTU, $281.36) is another example of how technology can be sheltered from tariffs and trade issues.

Intuit provides a wide array of financial management and other business solutions for individual consumers, accounting professionals, small- and medium-sized businesses and even financial institutions. While you probably don’t know the name Intuit, you almost certainly know its products, which include TurboTax and QuickBooks. Best of all, this is predominantly a domestic business, with less than 5% of revenues coming internationally.

Intuit shares have been on a tear in 2019, racing ahead 43% to more than double the broader market. A hot fiscal second quarter (ending Jan. 31, when many people were prepping for the 2019 tax season) showed a 38% jump in QuickBooks Online subscribers, to nearly 3.9 million, with a wider operating margin. Earnings grew 19%, then another 16% in its fiscal third quarter, sending Intuit shares to a string of fresh all-time highs.

INTU is costly as a result, but this is a momentum-and-growth play. And Intuit is pouring more and more into R&D -- $881 million in fiscal 2016, $998 million in ’17 and $1.2 billion in ’18 – which should help the company keep its edge. For instance, Intuit has augmented its popular TurboTax platform with TurboTax live, which lets users access a professional in real time as they prepare their taxes on using their software. This takes direct aim at tax preparer-assisted services, allowing Intuit to mine that $20 billion market.

• Market value: $7.8 billion
• Dividend yield: 3.8%

Real estate investment companies can be exposed to tariffs if they are active developers and must source construction supplies. But not all REITs are builders; some buy and manage properties, reducing their vulnerability to a trade war.

• Store Capital (STOR, $34.41) is one such REIT. It focuses on single-tenant properties that house anything from auto dealers and furniture retailers to health clubs and movie theaters.

And according to the company, it doesn’t build anything.

Store Capital offers the benefit of diversification, whether you’re trying to avoid the impact of tariffs or not. Some REITs have concentration risk because they deal with a small number of tenants, or a large number of tenants but one or more tenants make up an unhealthy percentage of revenues. But Store Capital leases 2,334 properties across 447 tenants, and its top 10 customers comprise just 18% of the company’s total rents. Further, the company’s locations are spread across all 50 states, so you get geographic diversification too.

Store’s customers are decidedly middle-market, but still diversified by size with 82% that have revenues greater than $1 billion, and approximately 30% with revenues between $50 and $200 million. Retailing accounts for about 64% of rents while service and manufacturing account for the balance.

Fans of Store Capital like to point out that it offers a hedge against e-commerce. That is, car washes, auto and RV dealers, farm supply and furniture stores are “Amazon-proof.” That might be what attracted Warren Buffett, whose Berkshire Hathaway (BRK.B) owns an 8.2% stake in the company.

Store has increased funds from operations (FFO, an important measure of REIT profitability) from $55 million in 2013 to $358 million in 2018, for compound annual growth of more than 45%. Dividends have grown about 8% annually over the same time period, owing mostly to aggressive property acquisition.

Investors looking for a high income stream often balk at closed-end funds (CEFs) because of their higher fees.

CEFs’ average annual fees sit at 1.09% (or $109 for every $10,000 invested), according to CEF Insider data, though it’s not unusual to see fees in the 3%-4% range. While it’s not a perfect comparison, Morningstar data shows that the asset-weighted average fee for mutual funds and exchange-traded funds (ETFs) in 2018 was just 0.48%. And many ETFs are far cheaper than that – SoFi even launched a pair of “zero-fee” funds in April.

Fees matter because they directly impact returns. “The higher the fee, the higher the hurdle for the ETF or mutual fund to keep up with their respective benchmark,” says Brian Parker, co-founder and managing director of EP Wealth Advisors in Torrance, California. Fail to keep up with that benchmark, and investors lose. High-cost funds can cost investors literally tens of thousands of dollars not just in the returns themselves, but opportunity cost (you have less money to reinvest and grow over time).

However, it occasionally pays to pay more. CEFs, for instance, deliver sky-high yields several times more than the average ETF yield – a boon for income investors who simply want to sit and collect checks over a long period of time rather than sell off assets to register returns. At the same time, you don’t need to tolerate absurdly high fees, especially from funds that don’t perform.

With that in mind, here are seven cheap CEFs to buy. Each closed-end fund boasts annual expenses below the CEF average.

Data is as of June 24. Market value, yields and expenses provided by Morningstar. Yields are distribution yields, which can be a combination of capital gains, investment income and return of capital.

• Market value: $369.9 million
• Distribution rate: 6.8%
• Expenses: 0.89%
• 10-year average annual total return: 16.8%

It’s not too surprising that the Cohen & Steers Total Return Realty (RFI, $14.15) has beaten Standard & Poor’s 500-stock index’s total return (which includes price returns and dividends) across most meaningful time periods within the past decade. Real estate investment trusts (REITs) – income-friendly companies that own properties – have been a massive winner following the Great Recession. (And, for that matter, for many of the years before the market tanked.)

But REITs are a complicated animal, which is why the actively managed Cohen & Steers’ RFI has outperformed even cheaper REIT index funds such as the SPDR Dow Jones REIT ETF (RWR) over most time periods.

Cohen & Steers doesn’t have the name recognition of fund providers such as Vanguard and Fidelity, but they’re titans in real estate investing, boasting several highly regarded REIT funds. That includes RFI, which delivers a hefty 6.8% yield, paid out monthly.

Learn more about RFI at Cohen & Steers’ provider site.

• Market value: $261.2 million
• Distribution rate: 6.7%
• Expenses: 0.91%
• 10-year average annual total return: 11.7%

The Nuveen S&P 500 Dynamic Overwrite Fund (SPXX, $15.74) is about as close as a CEF comes to being an index fund because it has strict rules on what it buys and sells. The fund’s objective is to “substantially replicate the price movements of the S&P 500 Index, as well as selling call options on 35%-75% of the notional value of the Fund’s equity portfolio (with a 55% long-term target).” So it keeps costs low by being relatively easily managed, requiring less active involvement compared to other strategies.

While SPXX has underperformed the index by about 3 percentage points annually over the past decade, that’s also no surprise to investors who know what the fund is supposed to do. This “covered call” strategy is meant to generate income and typically does best when the underlying asset moves sideways. But when it’s constantly going up – like, say, this 10-year bull market – the asset itself will typically outperform.

SPXX is for investors who want broad-market exposure but a much bigger income stream, especially if investors think we’re in for a period of middling performance.

Learn more about SPXX at Nuveen’s provider site.

• Market value: $1.5 billion
• Distribution rate: 3.7%
• Expenses: 0.49%
• 10-year average annual total return: 16.1%

If you’re looking for cheap CEFs that can keep up with the index, consider Tri-Continental Corporation (TY, $26.96). TY is a historically strong closed-end fund that primarily focuses on equities but can put up to 30% of its assets in bonds when it deems fit. As a result, the CEF has been able to play the bond market’s radical swings during the past decade’s confusion over Federal Reserve’s interest-rate policies.

Has this asset allocation strategy worked? Well, TY’s total return has beaten its category average over the trailing one-, three-, five- and 10-year periods, and it has even topped the S&P 500 in the three- and 10-year timetables. Management has proven itself savvy enough to give investors just enough bond exposure at the right times to boost returns.

The 3.7% yield is on the low end for a CEF, but it’s almost double what you’d get from the S&P 500. Better still, TY trades at about a 10% discount to the value of all its net assets, which essentially means you’re buying holdings such as Google parent Alphabet (GOOGL), Cisco (CSCO) and Verizon (VZ) for 90 cents on the dollar. That discount, by the way, has been slowly disappearing over the past two years as the fund becomes better known.

Learn more about TY at Columbia Threadneedle’s provider site.

• Market value: $313.3 million
• Distribution rate: 2.8%
• Expenses: 0.91%
• 10-year average annual total return: 14.3%
• Source Capital (SOR, $36.39) has put up nice returns over time thanks to its opportunistic and mostly agnostic investment strategies. This fund is willing to invest “across capital structure, geographies, sectors, and market caps” – and when equities don’t particularly appealing, it will ratchet up fixed-income exposure.

At its most recent look, Source Capital had a third of its assets invested in American investment-grade fixed income, 42% in U.S. equities, 18% in international equities and the rest in junk debt and cash. Those equities include high-quality U.S. stocks such as Bank of America (BAC) and United Technologies (UTX), as well as international giants such as China’s Baidu (BIDU).

Some investors might overlook SOR because of its low regular yield of less than 3%, but that doesn’t include special payouts, which can be massive. Source Capital paid a $3.20-per-share special distribution at the end of 2018 that translated into an additional 10% of annual yield. Patient investors who understand that SOR eventually will share the wealth also will get this CEF at a nearly 14% discount to NAV.

Learn more about SOR at First Pacific Advisors’ provider site.

• Market value: $691.4 million
• Distribution rate: 6.3%
• Expenses: 0.90%
• 10-year average annual total return: 12.1%
• BlackRock Enhanced Capital & Income Fund (CII, $15.67) has had a slightly lower return than the S&P 500 over most time periods, but that’s fine for two reasons. For one, this fund tends to provide some international exposure, too. And its massive 6.3% distribution rate smooths out returns, as well as gives investors a reason not to panic-sell during startling down moves such as the one we experienced in late 2018.

CII is currently about 90% U.S. equities with the rest sprinkled among stocks in countries such as the U.K. and Switzerland. Top holdings include Microsoft, Apple (AAPL) and JPMorgan Chase (JPM), and is in fact well-diversified among sectors, with five sectors weighted between roughly 12% and 19% of assets.

The way CII earns its income is clever. By writing call options on half of its portfolio, its means of delivering income is similar to SPXX, but CII has a more actively managed approach. By focusing on writing call options on single stocks that appear overvalued at the time, CII’s management tries to minimize the downside of being assigned a call option when a stock still has room to grow while also locking in gains when a rally has run its course.

Learn more about CII at BlackRock’s provider site.

• Market value: $1.6 billion
• Distribution rate: 1.0%
• Expenses: 0.56%
• 10-year average annual total return: 14.7%

If any fund deserves to be called the granddaddy of all CEFs, it’s Adams Diversified Equity Fund (ADX, $15.50). It has roots going back to 1854, has operated as a closed-end fund since 1929 and has paid dividends without interruption since 1935. This is the oldest still extant closed-end fund, and its managers maintain the value investing approach that has given this fund its long tenure.

Plus, it’s a sneakily strong income play.

Similar to SOR, ADX has a small annual regular distribution (about 1% annualized) but it pays a special distribution at the end of the year. The fund’s mandate is to pay at least a 6% yield. However, in 2018, ADX paid out $1.85 per share in a special distribution that, along with regular distributions totaling 15 cents per share, brought its annual distribution rate up to 12.9%.

Better still, Adams Diversified Equity – which broadly invests in high-quality, large-cap companies – is trading at a 13% discount to its net asset value. That’s a bargain, especially for a fund that has beaten the S&P 500’s total return over the trailing one-, three-, five- and 15-year periods.

It also belongs on any list of cheap CEFs, charging just 0.56% for its stellar performance.

Learn more about ADX at Adams’ provider site.

• Market value: $389.1 million
• Distribution rate: 5.0%
• Expense Ratio: 1.03%
• 10-year average annual total return: 9.2%

Putnam’s municipal bond fund is a secret tiger. Putnam Managed Municipal Income Trust (PMM, $7.72), which is meant to provide safe, tax-advantaged income, has delivered a monstrous 9.2% annualized over the past 10 years, making it one of the best-performing muni-bond closed-end funds on the market.

Incredibly, its performance hasn’t driven the fund to a premium valuation compared to its assets, like what has happened with other CEFs. For instance, Pimco Municipal Income (PMF) – which does boast better long-term performance, but only by about 1 percentage point annually over the past 10 years – trades at a 13% premium to its NAV.

PMF might be overbought now, but PMM is not given that shares are trading at 4% less than what they’re worth.

Putnam Managed Municipal Income Trust holds more than 400 municipal bonds of varying maturities, though the one- to five-year (34%) and five- to 10-year (48%) chunks account for the majority of assets. Credit quality is decent, at 65% investment-grade, though it’s certainly taking more chances than index funds such as iShares National Muni Bond ETF (MUB), which holds investment-grade munis almost exclusively.

That said, PMM is no income slouch, at a 5% distribution yield. And its discount is about half of what it was in December, so the market is moving fast on this highflyer.

Learn more about PMM at Putnam’s provider site.

It seems like forever ago, but the average 12-month certificate of deposit (CD) used to yield well more than 5%.

In fact, prior to the tech wreck of 2000 – and the start of two decades of experimental monetary policy by the Federal Reserve – 5% would have been considered low. It wasn’t usual to see CD yields over 10% in the 1980s. Those were the days!

It’s unlikely that we’ll ever see 10% CD rates again in our lifetimes. Even 5% would seem like a stretch in a world in which the average 12-month CD still yields less than 1% after more than three years of Fed rate hikes.

It’s important to remember, though, that the high yields of the past came at a time of much higher inflation. At today’s lower inflation rates, even a 3% yield allows you to stay well ahead of inflation. You’re not getting rich quick at that yield, but it’s respectable. And importantly, it can be done safely.

Today, we’re going to look at five safe ways to pocket a yield of at least 3%. While you might want to push for a higher return on your long-term investment portfolio, you can consider these as options for your cash savings that you might need in the next one to five years.

Data is as of June 13.

The average 12-month certificate of deposit yields an almost embarrassing 0.65% today. But that’s the average. If you’re willing to shop around and tie up your money for a longer period of time, there are plenty of banks that offer yields of around 3%. Assuming your deposit is $250,000 or less, the investment is as risk-free as a U.S. Treasury security. (FDIC insurance guarantees up to $250,000 per depositor per bank.)

So, if you have the high-quality problem of having more than a quarter-million dollars in excess savings lying around, simply buy CDs at multiple banks and enjoy protection of up to $250,000 at each one.

Your neighborhood bank might not be particularly competitive. CD rates are based on the bank’s demand for deposits at that particular time, and if the bank already has more deposits than it needs, it has no incentive to pay up for your money. But various websites such as Bankrate.com and Nerdwallet.com give you the ability to browse the highest-yielding options.

Many popular online brokers such as TD Ameritrade and E*Trade also allow you to shop around and buy CDs from an assortment of banks in your brokerage account. That’s convenient, as it saves you the hassle of keeping track of statements from multiple banks.

The single biggest selling point of municipal bonds is the fact that the interest earned is tax-free. So, the suggestion that a taxable muni might be a good investment tends to raise a few eyebrows.

But there are plenty of reasons to consider taxable municipal bonds. To start, you may have a large chunk of your nest egg in a non-taxable account like an IRA or 401(k). Tax-free interest is a meaningless perk when the account itself is already tax-free.

The interest rates on taxable munis tend to be higher than their non-taxable cousins to compensate for the loss of that tax break. And today, it’s not uncommon to find five- to seven-year, AA-rated taxable municipal bonds yielding well more than 3%.

Because the bond market is illiquid and your broker’s inventory of bonds may look very different than your neighbor’s, it doesn’t make sense to list individual bonds here. But if this sounds interesting to you, call or log in to your broker and see if they have any “direct payment Build America Bonds” with a credit rating of at least AA. You should be able to put together a portfolio of these with maturities of five to seven years yielding well over 3%.

An example drawn at random: The state of Pennsylvania had a 2010 direct-pay Build America Bond issue maturing in 2026. At current prices, it yields 3.1%. That’s good these days for a AA-rated bond.

Preferred stock is an interesting hybrid security. Chase Robertson – managing partner of Robertson Wealth Management, an RIA based in Houston – calls preferred stock “debt dressed as equity,” and that’s a good metaphor.

Like regular, good, old-fashioned common stock, preferred stock shows up on the balance sheet as equity. That’s important for banks and other companies that have covenants restricting how much debt they can carry. Also like common stock, preferreds pay dividends rather than interest and tend to do so on a quarterly schedule. Failure to pay that dividend will make the investors angry, though it’s not a default like a missed interest payment would be.

But unlike common stock dividends, which tend to rise over time, preferred stock dividends tend to be fixed, like bond interest. So, as a practical matter, you can think of preferred stock as a perpetual bond with no specified maturity date.

“Preferred stock is riskier than traditional bonds because it comes lower on the capital structure. Bondholders have to be made whole before the preferred equity holders get paid,” says Ellias Stabinsky, portfolio manager of the Robertson Wealth Preferred Equity portfolio. “But as a practice matter, a carefully constructed preferred stock portfolio will have better risk-adjusted returns than a high-yield bond portfolio.”

Be careful buying preferred stock priced at more than about $25 per share, as many issues are redeemable at that price. You’d hate to pay $27 for a preferred only to have the company buy it back from you the next day at $25.

The Bank of America Series E Preferred Stock (BAC-PE, $22.38) yields a respectable 4.4%. Likewise, the BB&T Series F Preferred Stock (BBT/PF, $25.04) yields 5.2%. You also can invest in preferreds via funds. The iShares Preferred and Income Securities ETF (PFF, $36.68), which holds more than 460 different preferred stocks, yields a respectable 5.9% and is generally far more liquid and easier to trade than most individual preferreds. It does charge 0.46% in annual expenses, however.

“Safety” and “stock market” generally don’t belong in the same sentence. But if it is specifically income you’re looking for, some of the safest dividends in the stock market tend to be found in real estate investment trusts (REITs). Specifically, triple-net REIT space.

Managing a triple-net portfolio might be the world’s easiest job. Rent is “net” of taxes, insurance and maintenance (hence the name) – your tenants are responsible for all three. Your only responsibility is to collect the rent, then recycle it into a steady dividend payment for the investors.

Two of the most stable REITs in the space are Realty Income (O, $73.07) and National Retail Properties (NNN, $55.21).

Realty Income manages a portfolio of more than 5,700 properties, most of which are high-traffic sites such as pharmacies and convenience stores. Walgreens (WBA) is its largest single tenant. National Retail runs a similar portfolio of nearly 3,000 properties, with 7-Eleven being its largest single tenant.

At current prices, Realty Income and National Retail yield 3.7% and 3.6%, respectively. Investors have bid them up considerably this year, too, so don’t expect much in the way of near-term capital gains. Also, REITs, like stocks, can be volatile. Case in point: Realty Income’s stock price has fluctuated between $52.37 and $74.14 over the past 52 weeks. But if it’s specifically income you’re looking for, the dividends thrown off by these two REITs are some of the safest you’ll find in the stock market.

If you prefer the diversity of an exchange-traded fund, the Vanguard Real Estate ETF (VNQ, $89.27), which charges 0.12% annually in fees, owns a diversified basket of roughly 190 REITs and yields a reasonable 4.0%.

If you’re looking for maximum safety, you should probably stop reading here. After a year-to-date run of nearly 15% – and a decade of nearly uninterrupted bull market conditions – the stock market is not priced to deliver high or even average returns over the next decade.

Since the bottom in 2009, the S&P 500 has risen at a compound annual rate of about 15% per year, which is much higher than the long-term historical average of 10%. So, either the future really does look different than the past ... or the next several years will have lower-than-average returns to get us back to the long-term average.

But you are specifically looking for dividend income, and you’re willing to sit through what could be some wild price fluctuations in the coming years, plenty of dividend stocks will pay you far in excess of 3% annually. Two fine examples:

• Altria Group (MO, $51.59), the U.S. manufacturer of Philip Morris and other tobacco brands, may be the most legendary dividend stock of all time. It raises its dividend like clockwork every year, and at current prices, it yields a substantial 6.2%.
• AT&T (T, $32.18) is another high-yielding stock that can round out an income portfolio. While phone and internet service are cutthroat businesses, the company is looking to the future in its acquisition of Time Warner and its media assets like HBO. At current prices, AT&T yields a very attractive 6.3%.

If picking individual stocks isn’t your cup of tea, the iShares Select Dividend ETF (DVY, $97.90) also is a solid option that yields a healthy 3.4% and charges 0.39% in annual expenses.

In a world of minuscule interest rates, investors are searching far and wide for yield. But many of them don’t need to look beyond the front door – if they live in an apartment.

Apartment real estate investment trusts (REITs) are well-poised to deliver reliable and growing dividends for the foreseeable future.

Homeownership rates in the United States have fallen, from 69.2% in the second quarter of 2004, to 64.2% at latest count. The decline is due in part to the higher underwriting standards instituted after 2008, and in part to younger Americans struggling to pay rent, let alone a down payment, mortgage bills and other costs of homeownership. Moreover, along the West Coast and in other cities such as Boston and New York, tough zoning laws and “NIMBY-ism” (Not In My Back Yard) prevent adequate new residential construction – a problem that does not look to be rectified easily, if ever.

The 10-year-long U.S. economic recovery and 4% mortgages have bumped up homeownership rates only marginally in recent seasons. Yet as national employment rolls expand, so is demand for housing – but a “severe shortage of housing” has been “too high of a hurdle for many would-be buyers to clear,” Freddie Mac recently said.

The housing shortage is a national concern, but for investors, the tight residential markets signal opportunity. Well-managed apartment REITs, which own and operate apartment communities, are perfectly positioned to take advantage. Here are six apartment REITs to buy for this housing shift … as well as sustained and growing dividend income.

Data is as of June 9. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.

• Market value: $19.5 billion
• Dividend yield: 2.6%

Essex Property Trust (ESS, $296.97) collects rent on nearly 60,000 apartment units in a combined 245 communities in California and Washington state. The REIT has more than 1,800 units under development to boot.

Essex has reported eight consecutive years of rising funds from operations (FFO, an important metric of REIT profitability) – that would extend to nine years if the company meets its 2019 estimates. And at the end of 2018, it reported $13.4 billion in assets (before depreciation) against $5.6 billion in liabilities (including mortgage debt). Translation: Essex is not over-leveraged. Notably, Fitch Ratings revised its outlook on Essex to “positive” from “stable,” and affirmed a “BBB+” investment-grade rating in June of last year that it maintains to this day.

The exciting story here, however, is the REIT’s dividends.

To be sure, Essex’s 2.6% yield is modest compared to other REITs. For comparison’s sake, the Invesco S&P 500 Equal Weight Real Estate ETF (EWRE) yields roughly 3%. But ESS excels at dividend hikes for the patient investor. In February, Essex announced a 4.8% bump to its first-quarter dividend. That marked ESS’ 25th consecutive year of annual dividend increases, qualifying it for inclusion in the S&P 500 Dividend Aristocrats. Its current quarterly payout of $1.95 per share is up 61.2% in just five years.

Yes, Essex has long benefited from one of the hottest West Coast apartment markets ever. But the company also managed to improve its payouts amid the 2007-09 financial crisis and bear market, which included one of the worst periods for American property since World War II.

New construction along the West Coast is limited and homebuying is becoming a more formidable undertaking. That will continue putting upward pressure on regional apartment rents, which positions ESS well to grow and boost its dividends for years to come.

• Market value: $13.0 billion
• Dividend yield: 3.0%

UDR Inc. (UDR, $46.14) is another apartment owner that’s positioned in more affluent areas of the U.S. The REIT owns or had shared-ownership stakes in 49,795 apartment units, primarily in “high barrier-to-entry” neighborhoods clustered in California, the Mid-Atlantic and Boston-New York regions.

In a refrain familiar to many apartment REITs, UDR seeks ownership in markets in which new housing construction is constrained by regulation or geography. The company also tout pet-friendliness to stand apart from the competition.

UDR has been an operational champ for years, with adjusted FFO growing 6.6% annually between 2013 through 2019 estimates, versus a median of 5.3% for its peers. Part of its performance has come from internal initiatives, such as charging for parking in certain situations or providing furnished rentals for leases of 30 or more days.

Like many other apartment REITs, UDR is not overly indebted – its assets of nearly $8 billion contrast well against liabilities of $3.9 billion. That puts it on strong financial footing to continue delivering its dividend, which has been paid out for 186 consecutive quarters. That payout has expanded by 46% over the past five years, including a 6.2% bump to 34.25 cents per share announced in March.

Analysts don’t often sound off on UDR, but Jefferies analyst Omotayo Okusanya upgraded the stock from “Hold” to “Buy” in late 2018 said the company was positioned to be “one of the best FFO/(share) growth profiles in our coverage in 2019,” citing the benefits from Amazon.com’s (AMZN) new headquarters – it has three assets within a three-mile radius of the company’s new headquarters in Arlington.

• Market value: $29.1 billion
• Dividend yield: 2.9%

AvalonBay Communities (AVB, $209.06) is a giant in the apartment world, holding ownership stakes in 291 apartment buildings with a total 85,313 units in 12 states and Washington, D.C. AvalonBay’s apartments are not concentrated in a single region, but instead are spread across the West Coast, New York-New Jersey, Mid-Atlantic and New England.

AvalonBay’s most recent earnings report included a 5.5% improvement in its so-called core FFO. That follows 4.3% growth in the metric for full-year 2018, and puts the company on its way to fulfilling estimates for 5.1% full-year 2019 growth in core funds from operations. The REIT has assets of $18.6 billion and liabilities of $7.9 billion, and debt is moderate; in the first quarter, interest expenses equaled less than 9% of revenues.

The company is well-regarded by the credit agencies, too. “AvalonBay's A3 senior unsecured rating incorporates the REIT's strong, low leveraged balance sheet, solid operating performance and its excellent liquidity and funding profile.” Moody’s wrote in a May report.

AvalonBay has outperformed the S&P 500, 46.4% to 45.77%, over the past five years. Once you include dividends, the difference is much starker, at 71.1% to 61.0%. AVB’s dividend has expanded by 42% over that time, to its current $1.52 per share.

• Market value: $28.9 billion
• Dividend yield: 2.9%

Equity Residential (EQR, $77.98) and AvalonBay routinely switch spots as the largest apartment REITs on the market. EQR owns or has a stake in 310 properties with a total of 80,061 apartment units, largely in Boston, New York, Seattle, San Francisco, Denver, Southern California and Washington, D.C. Legendary property investor Sam Zell is company chairman.

The company is known for owning higher-quality structures in high-quality markets. It also banks off high density – 70% of its net operating income is generated by mid/highrise properties.

EQR hasn’t been as consistent about FFO growth as some of the other picks on this list. Normalized funds from operations have ticked higher from $1.19 billion in 2014 to $1.20 billion in 2018, with plenty of up and down in between. But the REIT enjoyed a 3.8% pop in FFO last year, to $3.25 per share, and last quarter, EQR said “we are well positioned to deliver full year results near the top end of our guidance range if current trends continue.” If so, that would mean 5.8% FFO growth for 2019.

The company’s good fortunes caught the eye of Raymond James analyst Buck Home, who in April upgraded the company from “Underperform” (equivalent of “Sell”) to “Market Perform” (equivalent of “Hold”). Home also sees strong data in multifamily metros.

Equity Residential’s dividend has grown 42% over the past five years, but hardly in a consistent manner. Regular dividends actually dropped from 55.25 cents per share quarterly in Q1 2016 to 50.38 cents in Q2 2016 – but EQR also paid out $11.00 per share in special dividends that year. The payout remained stagnant until it was bumped up to 54 cents in Q2 2016, then climbed again to 56.75 cents earlier this year.

The good news? EQR Residential’s dividend only accounts for 66% of the full-year FFO figure that the REIT expects to hit in 2019, leaving plenty of room for either dividend hikes or special dividends as it sees fit.

• Market value: $10.3 billion
• Dividend yield: 3.0%

Camden Property Trust (CPT, $106.21) owns or has stakes in 56,271 apartments across 165 developments. And it stands in contrast to most of the other REITs on this list in that it’s heavily concentrated in the American Southeast and Washington, D.C. That includes heavy exposure in Texas; Camden operates 8,749 units in Houston, the REIT’s largest metropolitan market by number of apartment homes.

Better still, nearly all of Camden’s net interest income is derived from cities that rank within America’s top 25 in terms of estimated population growth and employment growth.

Camden dished out steady operations between 2014 and 2018, with revenues climbing from $790 million to $954 million in that time. Adjusted FFO hasn’t grown every single year during that period, but has broadly trended upward, from $318 million to $392 million. The company expects this uptrend to continue in 2019, guiding for FFO per share of $4.99 to $5.15 – at the midpoint, that would represent a 6.3% improvement in that important REIT metric.

And recently, the company’s debt was upgraded by Standard & Poor’s to A-, illustrating a strong financial foundation. Risk consultancy IHS Markit recently noted “that the perception of the company’s creditworthiness is positive.” The company’s $6.3 billion in assets versus $2.6 billion in liabilities is part of that tale.

Dividend growth here is OK, but not great. The payout has improved by a modest 21% since 2014, including no bump in the dividend during 2017. It’s a conservative stance by management, given that SUI is paying out less than two-thirds of its projected FFO for 2019. But if nothing else, that means the dividend is well-protected.

• Market value: $11.8 billion
• Dividend yield: 2.3%
• Sun Communities (SUI, $129.78) is not a true apartment REIT, but it’s a gem of a company that’s in somewhat close company.

Sun Communities owns and operates (or at least owns an interest in) 379 manufactured housing and recreational vehicle communities, hosting more than 132,000 developed sites. These sites are clustered mainly in the Midwest, Florida and California, though they span other states and Canada.

The “story” on SUI is the migration of aging baby boomers into more affordable trailer and RV parks. But they’re taking a cue from apartment complexes by offering a wealth of amenities, from pools and gyms to playgrounds and basketball courts to even golf courses and marinas. Sun Communities prides itself on operating manufactured-home lots that are a cut above the “trailer park” popular image, and it offers diversity by serving a different age group.

Earlier this month, BMO Capital analyst John Kim, who has an “Outperform” rating (equivalent of “Buy”) on SUI, raised his price target to $132 on optimism about the company’s joint venture with an Australian partner. He calls it a “compelling value proposition” because development returns there are “significantly higher.”

However, in Sun Communities’ first-quarter conference call with analysts, management warned that heavy flows of capital were entering the mobile-home lot space – a shorter-term issue, but one that is driving down returns on acquisitions.

Sun Communities’ current dividend-growth streak only dates back to 2017, with the payout improving by 12% across three hikes since then.

The trade war between the United States and China is well into its second year. Since Jan. 22, 2018, American stocks have made two runs into all-time-high territory, but overall, they haven’t made much progress. The Standard & Poor’s 500-stock index is just 2% higher than when the trade conflict started.

Now, uncertainty has returned, which means volatility has returned. So today, we’ll look at some of the best exchange-traded funds (ETFs) to battle another round of trade jitters.

On-again, off-again talks between the U.S. and China seemed headed toward a resolution for most of 2019 but hit a considerable wall in May. The U.S. accused China of walking back some of its agreements and raised tariffs on $200 billion in Chinese imports from 10% to 25%, prompting Beijing to retaliate with new and escalated tariffs of its own.

Certain sectors have taken on hair-trigger demeanors. For instance, technology, which experts think could be heavily targeted in future rounds of tariffs, swings daily on the latest comings and goings out of Washington and Beijing. Semiconductor companies, many of which generate gobs of their sales from China, are among the most susceptible stocks.

The best ETFs to buy if you want to beat back the trade war, then, avoid these sensitive industries and instead focus on businesses that should come out far less scathed than others. Here, we look at seven top funds from various corners of the market.

Data is as of May 15. Yields represent the trailing 12-month yield, which is a standard measure for equity funds.

• Market value: $896.2 million
• Dividend yield: 0.7%
• Expenses: 0.43%

Goldman Sachs was quick to the draw following the recent escalation in tariffs. Analyst David Kostin, Goldman’s head U.S. equity strategist, penned a report about stocks it thinks will be resilient if China and the U.S. continue to squabble – but that should also outperform even if they reach a resolution.

“Services firms are less exposed to trade policy and have better corporate fundamentals than goods companies and should outperform even if the trade tensions are ultimately resolved, as our economists expect,” he writes.

The iShares U.S. Consumer Services ETF (IYC, $210.89), then, would be one of the best ETFs to hold right now. It checks off several of the stocks on Goldman’s list, including top-10 weights Amazon.com (AMZN), McDonald’s (MCD) and Walt Disney (DIS). Amazon is the cornerstone of this fund, in fact, accounting for 21.0% of the fund’s assets under management – several times more than the weight of No. 2 holding Disney (4.7%).

IYC’s entire portfolio of investments sits around 170 stocks that are primarily large-cap ($10 billion or more in market value) and growth-focused in nature. More than half of the fund is invested in general or food-and-staples retailers, with heavy swaths in media and entertainment (23.1%) and consumer services (17.6%). There is also a peppering of companies from the transportation and software industries, among others.

This ETF isn’t completely China-proof – large holding Starbucks (SBUX), for instance, has invested heavily in its China presence and could suffer from anti-U.S. sentiment there. But many of IYC’s components are well-insulated from the conflict and line up with Goldman’s thesis.

Learn more about IYC at the iShares provider site.

• Market value: $9.9 billion
• Dividend yield: 3.1%
• Expenses: 0.13%

Investors typically look to utility companies for defense against any sort of market turbulence. These companies operate as virtual monopolies, generate extremely reliable revenues and profits, regularly get small rate hikes passed that fuel at least a little growth over time, and frequently deliver much more substantial dividend income than most other sectors.

American utility stocks also just so happen to have another trait that benefits them in this particular predicament: lack of exposure to China. Most U.S.-traded providers tend to operate regionally, across a few states; only a few operate internationally (and those that do tend to splash over into Canada or the U.K.).

The Utilities Select Sector SPDR Fund (XLU, $58.09) is the biggest utilities ETF at nearly $10 billion in assets under management. This straightforward fund simply holds the 28 utility companies in the S&P 500. This collection of mostly large “utes” includes significant holdings in NextEra Energy (NEE, 11.9%), Duke Energy (DUK, 8.0%) and Dominion Energy (D, 7.6%).

The ETF is an unsurprisingly high yielder, too, at 3.1% – behind only SPDR’s real estate fund (3.3%) and tied with its energy ETF.

Learn more about XLU at the SPDR provider site.

• Market value: $2.1 billion
• Dividend yield: 2.0%
• Expenses: 0.35%

Bank stocks are in a delicate situation right now. On the one hand, tariffs very well could crimp U.S. economic growth – April industrial and consumer data already showed slowing, both here and in China. National Economic Council Director Larry Kudlow even irritated President Donald Trump by admitting that “both sides” would suffer in a continued trade war.

The flip side? Some experts are opining that a slowdown could trigger a Federal Reserve rate cut. That would help widen the spread between short-term rates (which banks borrow at) and long-term rates (which banks lend to customers at), which should help support better profits.

Regional banks are a strong target right now. Not only do they operate almost entirely domestically, but they also don’t have added complications from operations such as trading desks that could suffer if investors become standoffish. And for years, they have benefited from rampant mergers and acquisitions, such as this year’s tie-up between large regionals SunTrust (STI) and BB&T (BBT).

• SPDR S&P Regional Banking ETF (KRE, $52.93) is a collection of more than 120 regional banks that span large, mid- ($2 billion-$10 billion), small ($300 million-$2 billion) and even micro-cap ($50 million-$300 million) stocks. That means that companies such as $835 million Central Pacific Financial (CPF), which operates a couple dozen branches in Hawaii, can have as much effect on the fund’s performance as multistate regional financial titans such as $59 billion PNC Financial Services (PNC).

Learn more about KRE at the SPDR provider site.

• Market value: $2.2 billion
• Dividend yield: 2.7%
• Expenses: 0.34%

Real estate investment trusts (REITs), for the uninitiated, are a special class of company that was created by Congress in 1960 to facilitate easier investing access to real estate. These companies own or finance properties such as apartments, office buildings and malls, and they’re required to pay out 90% of their taxable income as dividends to shareholders.

U.S. REITs feature a couple of similar benefits to utilities right now, then, in that they offer outsize dividend yield, and their businesses tend to be exclusively or at least primarily focused within America’s borders.

The iShares Cohen & Steers REIT ETF (ICF, $112.47) tracks an index built by Cohen & Steers – “the world’s first investment manager dedicated to real estate securities.” No surprise, then, that this has been one of the best ETFs in its class across most significant time periods.

ICF features a tight portfolio of 30 large REITs that “are dominant in their respective property sectors.” These include the likes of telecom infrastructure company American Tower (AMT, 8.8% weighting), industrial real estate firm Prologis (PLD, 8.2%), mall giant Simon Property Group (SPG, 7.4%) and data center REIT Equinix (EQIX, 7.1%).

You could gripe about ICF’s relatively meager yield of 2.7% that compares poorly to most of the higher-asset REIT ETFs. But the fund’s price performance is so consistently strong that even its total returns (price plus dividends) topple that of most rivals.

Learn more about ICF at the iShares provider site.

• Market value: $2.0 billion
• Dividend yield: 2.3%
• Expenses: 0.25%

Small-cap stocks frequently are touted as a getaway from international troubles. These companies typically derive most if not all of their revenues from within the U.S., which tamps down risk from dips in other countries’ economic activity. They also tend to avoid problems related from swings in the dollar and other currencies, which can weigh down the results of multinational blue chips.

Still, the trade war with China can still filter down in the form of higher input costs, and even the smaller companies in some industries (such as semiconductors) still have high Chinese exposure.

The Invesco S&P SmallCap Low Volatility ETF (XSLV, $47.73) is the best of a lot of worlds. XSLV holds the 120 stocks in the S&P SmallCap 600 that have the lowest realized volatility over the past 12 months – so you get the aforementioned benefits of smaller companies, but back out many of the riskier names.

As a result, its sector breakdown is well-tailored for success. Financial stocks (mostly regional banks and credit unions) make up a whopping 47.3% of the portfolio, followed by (mostly domestic) REITs at 21.7%. Another 5.6% is dedicated to utilities. Without even delving into some of the smaller allocations, three-quarters of this ETF’s assets are piled into somewhat “protected” sectors.

XSLV’s top holdings include several REITs that invest in mortgages and other real estate “paper,” including Apollo Commercial Real Estate Finance (ARI), Redwood Trust (RWT) and Armour Residential REIT (ARR).

Learn more about XSLV at the Invesco provider site.

• Market value: $329.0 million
• Dividend yield: 5.3%
• Expenses: 0.29%

The U.S. is naturally not the only place where trade jitters are weighing down stocks. Chinese equities have been held down, too, as have other emerging markets stocks.

But Jason Bloom, director of global macro ETF strategy at Invesco, believes there still are winners in emerging markets – you just need the right focus.

“We do like EMs, we do think the demographics are good, but there is disruption” from the trade conflict from the U.S., he says. “A lot of the businesses that are moving out of China to get around the tariffs are going to other EM markets. China’s losses are not necessarily the world’s loss, at least not from a zero-sum standpoint.

“A low-volatility screen is maybe one of our favorite ways to play volatile markets, not just in EMs, but in the U.S. It’s worked very well in the year-plus since the trade conflict erupted.”

The Invesco S&P Emerging Markets Low Volatility ETF (EELV, $23.20) is one of the best ETFs for this specific strategy. The fund invests in 200 stocks from an index of large- and mid-cap emerging markets companies that have exhibited the least volatility over the past 12 months. Right now, its portfolio contains just 10 countries, and whereas many EM funds are heavily weighted in China, less than 9% of EELV is dedicated to Chinese stocks. The biggest weighting is Taiwan – which Jason Bloom calls his “top pick” because it’s not tied to China the way Japan, Korea and other Asian economies are – at 28%. Thailand (14.8%) and Malaysia (10.1%) are other significant geographical weights.

Learn more about EELV at the Invesco provider site.

• Market value: $2.3 billion
• Dividend yield: 3.2%
• Expenses: 0.76%

One of the theories floated around is the “nuclear option” – that China could sell off part of its $1.13 trillion in U.S. Treasuries as an escalator of last resort. But some experts say that’s a lot of hot air.

“China will continue to use this as a threat, perhaps, but in reality I think it hurts them more than it might hurt us,” Kim Rupert, managing director of global fixed income analysis at Action Economics, recently told CNBC. “It hurts their portfolio. … I think it will be more a threat than an actual tool or strategy.”

Outside that worst-case scenario, investors may continue to view Treasuries and other bonds as a source of safety against volatility, thus driving prices higher.

The uncertain landscape seems to favor the agility of skilled active management over a plain-Jane index. The Pimco Active Bond Exchange-Traded Fund (BOND, $105.74) – a Kiplinger ETF 20 selection from one of the most respected names in bond products – is among the best ETFs for the job.

BOND, helmed by David Braun, Jerome Schneider and Daniel Hyman, holds roughly 750 primarily investment-grade debt issues across myriad fixed-income types, subject to management’s discretion. Right now, the portfolio is most heavily tilted toward securitized products (59.0%), with roughly a quarter of the fund (23.8%) in investment-grade corporate debt. It also has sprinklings of U.S. government debt, high-yield bonds (junk) and even a little emerging-market debt, among other holdings.

This five-star Morningstar-rated ETF has rewarded above-average risk with high returns. It has beaten the Bloomberg Barclays US Aggregate Bond (Agg) benchmark in every significant time period since inception in 2012.

Learn more about BOND at the Pimco provider site.

Preferred stocks may sound like humdrum investments, but the category’s performance has been anything but, with year-to-date total returns of about 7.5%. In March, 15 new offerings totaling nearly $3 billion appeared, four times the usual monthly quota. That’s good news for anyone looking for fully liquid investments that pay a significant yield premium over Treasuries, bank deposits and most dividend-paying common stocks. Preferred shares pay a fixed dividend that takes priority over common-stock payouts. Common stockholders can’t get a cent unless preferred investors are paid as promised, though bondholders get paid first.

Explanations for the burst of new preferreds include random timing; companies raising money for mergers and acquisitions; and issuers eager to pay off or refinance their bank and bond debt on easy terms. Businesses with good to middling credit ratings can lock up financing for 6% or so, possibly in perpetuity because a preferred stock normally lacks a specific maturity date, although the issuer can often redeem after five years. For savers, a coupon rate of roughly 6% is excellent now that interest rates aren’t rising and may indeed recede. For a CEO whose alternatives include issuing junk bonds, selling assets (creating a tax liability) or taking on variable-rate bank loans, preferreds are an affordable financing solution.

In truth, preferred stocks have been a great deal for ages. It’s astonishing that they aren’t more widely promoted. Word is getting out, though: Exchange-traded fund iShares Preferred & Income Securities (symbol PFF, price $37, yield 5.3%) has amassed nearly $15 billion in assets, which is a lot relative to an asset class that claims just $250 billion. (Prices, yields and other data are through April 19 unless otherwise noted.)

Great returns every which way. Standard & Poor’s tracks preferreds in many ways, measuring the category broadly as well as sliced into fixed-rate, floating-rate, low-volatility, real estate investment trust preferreds and more. The 10-year annualized returns through early April are grand: 10.5% for U.S. investment-grade preferreds, for example, 11.4% for REIT preferreds and 12.4% for preferreds whose initial fixed rates eventually convert to floating rates. The outsize gains of 2009 inflate 10-year records. But if you start at 2010, you still have excellent returns with little volatility and few defaults or skipped dividends.

Astute fund managers have added huge value. Flaherty & Crumrine, a manager of closed-end preferred funds, is tops. The F&C Preferred Income Fund (PFD, $14) has a nine-year average annual return of 10.7% and a 10-year annualized gain of 16.9%. Sibling funds F&C Preferred Securities Income (FFC, $19) and F&C Preferred Income Opportunity (PFO, $11) have similar returns. Circling back to the latest offerings, notable debuts include Digital Realty Trust’s 5.85% Series K (DLR-K) and Brighthouse Financial’s 6.60% Series A (BHFAP). (It can be tricky to find prices and symbols for preferreds, but brokers, Morningstar.com and the Wall Street Journal are reliable.)

Preferred shares are issued with a fixed face value and, in theory, can be redeemed at that value—typically $25 a share. I think it’s okay to buy preferreds at prices up to $26 a share—about where the better new issues trade now—because a generous yield compensates for that possibility.

As for risks, the bears worry that short-term traders’ antics could cause a mini panic, or that stellar gains and rising demand will foster a pile of junky offerings and a burst of defaults and downgrades. I never say never, but I’ve heard those warnings for years about REITs, utilities, high-yield bonds and municipals, too, without any cataclysms. There are many protections for preferred shareholders. Don’t be too nervous to take advantage of a great opportunity.

For more than a decade, income investors have been plagued by paucity wrapped in misery. The bellwether 10-year Treasury note has doled out an average 2.6% interest since 2008. Although the Federal Reserve has nudged its target interest rate range to 2.25% to 2.50%, it has signaled that it’s done raising rates for now.

Even worse, the yield on the 10-year T-note briefly sank below the yield on the three-month T-bill—an unusual inversion that can sometimes herald a recession and lower yields ahead. The takeaway: Locking your money up for longer periods is rarely worth the negligible increase in yield.

What could increase your yield these days? Being a little more adventurous when it comes to credit quality. When you’re a bond investor, you’re also a lender, and borrowers with questionable credit must pay higher yields. Similarly, stocks with above-average yields probably have some skeletons in their balance sheets.

You can ameliorate credit risk—but not eliminate it—through diversification. Invest in a mutual fund, say, rather than a single issue. And invest in several different types of high-yielding investments—for example, investment-grade bonds, preferred stocks and real estate investment trusts—rather than just one category.

Despite such caveats, income investing is not as bad as it was in 2015, when it was hard to milk even a penny’s interest out of a money market. Now you can get 3.3% or more from no-risk certificates of deposit at a bank. We’ll show you 33 ways to find the best yields for the risk you’re willing to take, ranging from 2% all the way up to 12%. Just remember that the higher the payout, the greater the potential for some rough waters.

Prices, yields and other data are as of April 19.

Short-term interest rates largely follow the Fed’s interest rate policy. Most observers in 2018 thought that would mean higher rates in 2019. But slowing economic growth in the fourth quarter of 2018 and the near-death experience of the bull market in stocks changed that. The Fed’s rate-hiking campaign is likely on hold for 2019.

Still, money markets are good bets for money you can’t stand to lose. Money market funds are mutual funds that invest in very-short-term, interest-bearing securities. They pay out what they earn, less expenses. A bank money market account’s yield depends on the Fed’s benchmark rate and the bank’s need for deposits.

• The risks: Money market mutual funds aren’t insured, but they have a solid track record. The funds are designed to maintain a $1 share value; only two have allowed their shares to slip below $1 since 1994. The biggest risk with a bank money market deposit account is that your bank won’t raise rates quickly when market interest rates rise but will be quick on the draw when rates fall. MMDAs are insured up to $250,000 by the federal government.
• How to invest: The best MMDA yields are from online banks, which don’t have to pay to maintain brick-and-mortar branches. Currently, a top-yielding MMDA is from Investors eAccess, which is run by Investors Bank in New Jersey. The account has no minimum, has an annual percentage yield of 2.5% and allows six withdrawals per month.

You’ll get a bump from a short-term CD, provided you can keep your money locked up for a year. Merrick Bank, in Springfield, Mo., offers a one-year CD yielding 2.9%, with a $25,000 minimum. The early-withdrawal penalty is 2% of the account balance or seven days’ interest, whichever is larger. The top five-year CD yield was recently 3.4%, from First National Bank of America in East Lansing, Mich.

Your primary concern in a money fund should be how much it charges in expenses. Vanguard Prime Money Market Fund (symbol VMMXX, yield 2.5%) charges an ultralow 0.16% a year and consistently sports above-average yields.

Investors in high tax brackets might consider a tax-free money fund, whose interest is free from federal (and some state) income taxes, such as Vanguard Municipal Money Market Fund (VMSXX 1.6%). To someone paying the maximum 40.8% federal tax rate, which includes the 3.8% net investment income tax, the fund has the equivalent of a 2.7% taxable yield. (To compute a muni’s taxable-equivalent yield, subtract your tax bracket from 1, and divide the muni’s yield by that. In this case, divide 1.6% by 1 minus 40.8%, or 59.2%). The fund’s expense ratio is 0.15%.

Muni bonds are IOUs issued by states, municipalities and counties. At first glance, muni yields look as exciting as a month in traction. A 10-year, AAA-rated national muni yields 2.0%, on average, compared with 2.6% for a 10-year Treasury note.

But the charm of a muni bond isn’t its yield; it’s that the interest is free from federal taxes—and, if the bond is issued by the state where you live, from state and local taxes as well. As with tax-free money funds, investors should consider a muni fund’s taxable equivalent yield; in the case above, it would be 3.4% for someone paying the top 40.8% federal rate.

Yields get better as you go down in credit quality. An A-rated 10-year muni—two notches down from AAA but still good—yields 2.3%, on average, or 3.9% for someone paying the top rate.

• The risks: Munis are remarkably safe from a credit perspective, even considering that defaults have inched up in recent years. But like all bonds, munis are subject to interest rate risk. If rates rise, your bond’s value will drop (and vice versa), because interest rates and bond prices typically move in opposite directions. If you own an individual bond and hold it until it matures, you’ll most likely get your full principal and interest. The value of muni funds, however, will vary every day.
• How to invest: Most investors should use a mutual fund or ETF, rather than pick their own individual bonds. Look for funds with rock-bottom expenses, such as Vanguard Limited-Term Tax-Exempt (VMLTX, 1.8%). The fund charges just 0.17%, and yields the equivalent of 3% for someone paying the highest federal tax rate. It’s a short-term fund, which means it’s less sensitive to interest rate swings. That means its share price would fall less than longer-term funds’ prices if rates were to rise. The average credit quality of the fund’s holdings is a solid AA–.
• Fidelity Intermediate Municipal Income (FLTMX, 2.0%), a member of the Kiplinger 25, the list of our favorite no-load funds, gains a bit of yield (a taxable equivalent of 3.4% for those at the top rate) by investing in slightly longer-term bonds. The fund’s expense ratio is 0.37%; the largest percentage of assets, 39%, is in AA bonds.
• Vanguard High-Yield Tax-Exempt Fund Investor Shares (VWAHX, 2.9%) also charges just 0.17% in fees and yields 4.9% on a taxable-equivalent basis for someone at the highest rate. The extra yield comes from investing in a sampling of riskier bonds. But the fund’s average BBB+ credit rating is still pretty good, and its return has beaten 96% of high-yield muni funds over the past 15 years.

You get higher yields from corporate bonds than you do from government bonds because corporations are more likely to default. But that risk is slim. The one-year average default rate for investment-grade bonds (those rated BBB– or higher), is just 0.09%, going back to 1981, says Standard & Poor’s.

And corporate bonds rated AAA and maturing in 20 or more years recently yielded 3.7%, on average, while 20-year Treasury bonds yielded 2.8% and 30-year T-bonds, 3.0%. You can earn even more with bonds from firms with lightly dinged credit ratings. Bonds rated BBB yield an average 4.0%.

• The risks: The longer-term bond market moves independently of the Fed and could nudge yields higher (and prices lower) if inflation worries pick up. Though corporate defaults are rare, they can be devastating. Lehman Brothers, the brokerage firm whose bankruptcy helped fuel the Great Recession, once boasted an investment-grade credit rating.
• How to invest: Active managers select the bonds at Dodge & Cox Income (DODIX, 3.5%). This fund has beaten 84% of its peers over the past 15 years, using a value-oriented approach. It holds relatively short-term bonds, giving its portfolio a duration of 4.4 years, which means its share price would fall roughly 4.4% if interest rates rose by one percentage point over 12 months. The fund’s average credit quality is A, and it charges 0.42% in expenses.

If you prefer to own a sampling of the corporate bond market for a super-low fee, Vanguard Intermediate-Term Corporate Bond Index Fund Admiral Shares (VICSX, 3.6%) is a good choice. Vanguard recently lowered the minimum investment to $3,000, and the fund charges just 0.07%.

Interest-rate risk is high with Vanguard Long-Term Bond ETF (BLV, $91, 3.8%). The exchange-traded fund has a duration of 15, which means fund shares would fall 15% if interest rates moved up by one percentage point in a year’s time. Still, the yield on this long-term bond offering is enticing, and the fund’s expense ratio is just 0.07%.

Dividend stocks have one advantage that bonds don’t: They can, and often do, raise their payout. For example, Procter & Gamble (PG, $106, 2.7%), a member of the Kiplinger Dividend 15, the list of our favorite dividend-paying stocks, raised its dividend from $2.53 a share in 2014 to $2.84 in 2018, a 2.3% annualized increase.

Preferred stocks, like bonds, pay a fixed dividend and typically offer higher yields than common stocks. Banks and other financial services firms are the typical issuers, and, like most high-dividend investments, they are sensitive to changes in interest rates. Yields for preferreds are in the 6% range, and a generous crop of new issues offers plenty of choices.

• The risks: Dividend stocks are still stocks, and they will fall when the stock market does. Furthermore, Wall Street clobbers companies that cut their dividend. General Electric slashed its dividend to a penny per share on December 7, 2018, and the stock fell 4.7% that day.
• How to invest: Some slower-growing industries, such as utilities or telecommunications firms, tend to pay above-average dividends. Verizon Communications (VZ, $58, 4.2%), a Kip 15 dividend stock, is the largest wireless carrier in the U.S. Its investment in Fios fiber-optic cable should pay off in coming years. SPDR Portfolio S&P 500 High Dividend ETF (SPYD, $39, 4.3%) tracks the highest-yielding stocks in the S&P 500 index. The fund has 80 holdings and is sufficiently diversified to handle a clunker or two.
• Utility PPL Corp. (PPL, $31, 5.3%) derives more than 50% of its earnings from the United Kingdom. Worries that the U.K.’s departure from the European Union will pressure PPL’s earnings have weighed on the stock’s price, boosting its yield. Nevertheless, PPL’s U.S. operations provide strong support for the company’s generous payout.

Ma Bell is a Dividend Aristocrat, meaning that AT&T (T, $32, 6.4%) has raised its dividend for at least 25 consecutive years (35 straight years, in AT&T’s case). The company has plenty of free cash flow to keep raising its payout.

You can invest in two types of REITs: those that invest in property and those that invest in mortgages. Both types must pass on at least 90% of their revenue to investors, which is partly why they have such excellent yields. Typically, REITs that invest in income-producing real estate have lower yields than those that invest in mortgages.

The average property REIT yields 4.1%, compared with the average mortgage REIT yield of 10.6%, according to the National Association of Real Estate Investment Trusts. Why the big difference? Property REITs rack up expenses when they buy and sell income properties or lease them out as landlords. Mortgage REITs either buy mortgages or originate them, using borrowed money or money raised through selling shares as their capital.

• The risks: When the economy slows down, so does the real estate market, and most REITs will take a hit in a recession. Mortgage REITs are exceptionally sensitive to interest rate increases, which squeeze their profit margins, and to recessions, which increase the likelihood of loan defaults.
• How to invest: Realty Income Corp. (O, $69, 4.0%) invests in property and rents it to large, dependable corporations, such as Walgreens, 7-Eleven and Fed-Ex. It’s a Kiplinger 15 dividend stalwart and pays dividends monthly.
• Fidelity Real Estate Income (FRIFX, 4.0%) isn’t a REIT, although it invests in them (among other things). The fund puts income first. It has 43% of its assets in bonds, most of them issued by REITs. The fund lost 0.6% in 2018, compared with a 6% loss for other real estate funds.
• Annaly Capital Management (NLY, $10, 12%) is a REIT that borrows cheaply to buy government-guaranteed mortgage securities. Most of those holdings are rated AA+ or better. Annaly boosts its yield by investing in and originating commercial real estate loans and by making loans to private equity firms. Its 2018 purchase of MTGE Investment, a mortgage REIT that specializes in skilled nursing and senior living facilities, will help diversify the firm’s portfolio. Annaly is the largest holding of iShares Mortgage Real Estate Capped ETF.

Investors will forgive a lot in exchange for a high yield. In the case of iShares Mortgage Real Estate Capped ETF (REM, $44, 8.2%), they’re choosing to accept a high degree of concentration: The top four holdings account for 44% of the ETF’s portfolio. Although concentration can increase risk, in this instance the fund’s huge position in mortgage REITs has helped returns. Falling interest rates late in 2018 pushed up mortgage REITs, limiting the fund’s losses to just 3% in 2018.

If you think interest rates are low in the U.S., note that most developed foreign countries have even lower rates because their economies are growing slowly and inflation is low. The U.K.’s 10-year bond pays just 1.2%; Germany’s 10-year bond yields 0.1%; Japan’s yields –0.03%. There’s no reason to accept those yields for a day, much less a decade.

You can, by contrast, find decent yields in some emerging countries. Emerging-markets bonds typically yield roughly four to five percentage points more than comparable U.S. Treasury bonds, which would put yields on some 10-year EM debt at about 7%, says Pramol Dhawan, emerging-markets portfolio manager at bond fund giant Pimco.

• The risks: You need a healthy tolerance for risk to invest in emerging-markets bonds. U.S. investors tend to be leery of them because they remember massive defaults and currency devaluations, such as those that occurred in Asia in the late 1990s. But in the wake of such debacles, many emerging countries have learned to manage their debt and their currencies better than in the past.
• How to invest: Dodge & Cox Global Bond (DODLX, 4.5%) can invest anywhere, but lately it has favored U.S. bonds, which were recently 48% of the portfolio. The fund’s major international holdings show that it isn’t afraid to invest in dicey areas—it has 11% of its assets in Mexican bonds and 7% in United Kingdom bonds.
• Fidelity New Markets Income (FNMIX, 5.6%), a Kip 25 fund, has been run by John Carlson since 1995. That makes him one of the few emerging-markets debt managers who ran a portfolio during the currency-triggered meltdown in 1997-98. He prefers debt denominated in dollars, which accounts for 94% of the portfolio. But he can be adventurous: About 6.5% of the fund’s assets are in Turkey, which is currently struggling with a 19% inflation rate and a 14.7% unemployment rate.
• IShares Emerging Markets High Yield Bond ETF (EMHY, $46, 6.2%) tracks emerging-markets corporate and government bonds with above-average yields. The holdings are denominated in dollars, so there’s less currency risk. But this is not a low-risk holding. It’s more than twice as volatile as the U.S. bond market, although still only half as volatile as emerging-markets stocks.

But currency is still a key consideration. When the U.S. dollar rises in value, overseas gains translate into fewer greenbacks. When the dollar falls, however, you’ll get a boost in your return. A higher dollar can also put pressure on foreign debt denominated in dollars—because as the dollar rises, so do interest payments.

Junk bonds—or high-yield bonds, in Wall Street parlance—aren’t trash to income investors. Such bonds, which are rated BB+ or below, yield, on average, about 4.7 percentage points more than the 10-year T-note, says John Lonski, managing director for Moody’s Capital Markets Research Group.

What makes a junk bond junky? Typical high-yield bond issuers are companies that have fallen on hard times, or newer companies with problematic balance sheets. In good times, these companies can often make their payments in full and on time and can even see their credit ratings improve.

• The risks: You’re taking an above-average risk that your bond’s issuer will default. The median annual default rate for junk bonds since 1984 is 3.8%, according to Lonksi. In a recession, you could take a big hit. In 2008, the average junk bond fund fell 26%, even with reinvested interest.
• How to invest: RiverPark Strategic Income (RSIVX, 4.8%) is a mix of cash and short-term high-yield and investment-grade bonds. Managers choose bonds with a very low duration, to cut interest rate risk, and a relatively low chance of default.
• Vanguard High-Yield Corporate (VWEHX, 5.5%), a Kip 25 fund, charges just 0.23% in expenses and invests mainly in the just-below-investment-grade arena, in issues from companies such as Sprint and Univision Communications.
• SPDR Bloomberg Barclays High Yield Bond ETF (JNK, $36, 5.8%) charges 0.40% in expenses and tracks the Barclays High Yield Very Liquid index—meaning that it invests only in easily traded bonds. That’s a comfort in a down market because when the junk market turns down, buyers tend to dry up. The fund may lag its peers in a hot market, however, as some of the highest-yielding issues can also be the least liquid.

Investors who are bullish on the economy might consider Northern High Yield Fixed Income Fund (NHFIX, 7.0%). The fund owns a significant slice of the junkier corner of the bond market, with about 23% of its holdings rated below B by Standard & Poor’s. These bonds are especially vulnerable to economic downturns but compensate investors willing to take that risk with a generous yield.

You might be surprised to learn how much income you can generate from moving hydrocarbons from one place to another. Most MLPs are spin-offs from energy firms and typically operate gas or oil pipelines.

MLPs pay out most of their income to investors and don’t pay corporate income taxes on that income. Those who buy individual MLPs will receive a K-1 tax form, which spells out the income, losses, deductions and credits that the business earned and your share of each. Most MLP ETFs and mutual funds don’t have to issue a K-1; you’ll get a 1099 form reporting the income you received from the fund.

• The risks: In theory, energy MLPs should be somewhat immune to changes in oil prices; they collect fees on the amount they move, no matter what the price. In practice, when oil gets clobbered, so do MLPs—as investors learned in 2015, when the price of West Texas intermediate crude fell from $53 a barrel to a low of $35 and MLPs slid an average 35%. Oil prices should be relatively stable this year, and high production levels should mean a good year for pipeline firms.
• How to invest: Magellan Midstream Partners (MMP, $62, 6.5%) has a 9,700-mile pipeline system for refined products, such as gasoline, and 2,200 miles of oil pipelines. The MLP has a solid history of raising its payout (called a distribution) and expects a 5% annual increase in 2019.

The giant of MLP ETFs, Alerian MLP ETF (AMLP, $10, 7.2%), boasts $9 billion in assets and delivers a high yield with reasonable expenses of 0.85% a year. Structured as a C corporation, the fund must pay taxes on its income and gains. That can be a drag on yields compared with MLPs that operate under the traditional partnership structure. EQM Midstream Partners (EQM, $46, 10.1%) is active in the Appalachian Basin and has about 950 miles of interstate pipelines. The firm paid $4.40 in distributions per unit last year and expects to boost that to $4.58 in 2019.

Closed-end funds (CEFs) are the forebears of mutual funds and ETFs. A closed-end fund raises money through an initial stock offering and invests that money in stocks, bonds and other types of securities, says John Cole Scott, chief investment officer, Closed-End Fund Advisors.

The fund’s share price depends on investors’ opinion of how its picks will fare. Typically, the fund’s share price is less than the current, per-share value of its holdings—meaning that the fund trades at a discount. In the best outcome, investors will drive the price up to or beyond the market value of the fund’s holdings. In the worst case, the fund’s discount will steepen.

• The risks: Many closed-end income funds borrow to invest, which can amplify their yields but increase their price sensitivity to changes in interest rates. Most CEFs have higher expense ratios than mutual funds or ETFs, too.
• How to invest: Ares Dynamic Credit Allocation Fund (ARDC, $15, 8.5%) invests in a mix of senior bank loans and corporate bonds, almost all of which are rated below investment grade. Borrowed money as a percentage of assets—an important indicator for closed-end funds known as the leverage ratio—is 29.6%, which is a tad lower than the average of 33% for closed-end funds overall. The fund’s discount to the value of its holdings has been narrowing of late but still stands at 12.1%, compared with 11.2%, on average, for the past three years.
• Advent Claymore Convertible Securities and Income Fund (AVK, $15, 9.4%), run by Guggenheim Investments, specializes in convertible bonds, which can be exchanged for common stock under some conditions. The fund also holds some high-yield bonds. Currently, it’s goosing returns with 40% leverage, which means there’s above-average risk if rates rise. For intrepid investors, the fund is a bargain, selling at a discount of 10.6%, about average for the past three years.
• Clearbridge Energy Midstream Opportunity (EMO, $9, 9.7%) invests in energy master limited partnerships. It sells at a 12.1% discount, compared with a 6.6% average discount for the past three years. Its leverage ratio is 33%—about average for similar closed-end funds.

What's a 199A dividend? New for 2018 tax returns, this term refers to income from a real estate investment trust -- and those 199A dividends could qualify for a sweet tax break.

Part of federal tax reform, Section 199A of the tax code details the rules for the new 20% tax break for qualified business income. And under those rules, REIT investment income is eligible for the 20% QBI deduction.

You'll find the Section 199A dividends amount on Line 5 of Form 1099-DIV. Use the Form 1040 instructions to figure out any tax deduction on that amount. The 20% QBI tax deduction is on Form 1040, Page 2, Line 9.

Wall Street pros, the analyst community and individual investors alike were thrown for a loop in 2018. American tariff disputes with the rest of the world, wild energy-price swings and global growth concerns not only ravaged the market at various points, but also has the experts preaching caution as we enter the new year. The best ETFs for 2019, then, are going to need to accomplish a couple specific goals.

For one, you’ll want some ETFs that position you defensively while still allowing you to enjoy at least some upside should the market head higher despite all the headwinds it faces. Numerous expert market outlooks have the Standard & Poor’s 500-stock index climbing in 2019, but none of them are exuberant and all of them warn of numerous potential pitfalls. Anchoring your portfolio with funds that emphasize, say, low volatility or income can put you in a strong position no matter what the market brings.

You also need to take your shots – stocks may end up being sluggish as a whole, but that doesn’t mean certain areas of the market can’t explode all the same. So some of the top ETFs for the year ahead will focus on specific sectors, industries and even other areas of the world to try to generate outperformance.

Here are the best ETFs to buy for 2019. These 19 funds run the gamut, from highly diversified baskets invested in thousands of companies, to concentrated portfolios that use just a couple dozen stocks to benefit from a specific theme. There are ETFs for conservative investors and risk takers alike. And while most of these picks are passive index funds, there are even a few ETFs that tap the brainpower of skilled active management. Take a look:

Data is as of Jan. 14, 2019. Yields represent the trailing 12-month yield, which is a standard measure for equity funds.

• Type: Large-cap blend stock
• Market value: $99.1 billion
• Dividend yield: 2.0%
• Expenses: 0.04%

The Vanguard S&P 500 ETF (VOO) – or at least some S&P 500 tracker fund – typically makes most “best ETFs” lists in any given year. That’s because even the best money managers in the world have a hard time beating the market.

The SPIVA U.S. Year-End 2017 report showed that in 2017, 63.08% of large-cap managers underperformed the S&P 500. That’s not good, and it gets worse as time goes on – 80.56% underperformed in the three-year period, 84.23% in the five-year, 89.51% in the 10-year and 92.33% in the 15-year.

Beating the market certainly is much more difficult for “mom ‘n’ pop” investors, who might spend only a couple hours every month examining their investments … so why not simply match the market with the VOO or a similar fund?

But this year, investors may want to consider the Vanguard Total Stock Market ETF (VTI, $131.96). Why? Because Vanguard itself sees it as the better option for its employees. In 2018, Vanguard removed the S&P 500-tracking Vanguard Institutional Index Fund (VINIX) from its 401(k) and replaced it with the Vanguard Total Stock Market Index Fund (VTSMX).

“We believe the (VTSMX) is the best proxy for the U.S. market, offering exposure to large-, mid-, and small-cap stocks, whereas Vanguard Institutional Index Fund concentrates on large-cap stocks,” a spokesman told MarketWatch in confirming a Philadelphia Inquirer report about the change.

The VTI provides exposure to more than 3,600 stocks of all sizes – from $783.4 billion Microsoft (MSFT) to $5.8 million Pernix Therapeutics Holdings (PTX) – giving investors much more comprehensive exposure to the U.S. stock market. At the same time, VTI’s holdings are weighted by market capitalization, which means the largest companies still have the most sway in the ETF’s performance.

The result? The VTI performs very similarly to the VOO, beating it by a few basis points some years, falling behind a little in others. It’s also one of the cheapest funds you can buy: For a skinflint 0.04% in expenses, you pay just $4 annually for every $10,000 invested.

Learn more about VTI at the Vanguard provider site.

• Type: Low-volatility dividend stock
• Market value: $572.74 million
• Dividend yield: 3.8%
• Expenses: 0.27%

As mentioned earlier, financial experts have a wide range of opinions on how 2019 could turn out – and not all of them are rosy. So the best ETFs for 2019 may be the ones that simply lose the least.

Enter low-volatility ETFs, which were the talk of Wall Street during the final quarter of 2018. These funds target stocks that tend to move less drastically than the broader market – a vital trait when the broader market is heading lower. The thing is, these kinds of funds also can lag the markets on their way back up. But the Legg Mason Low Volatility High Dividend ETF (LVHD, $29.32) helps make up some of the difference by delivering high income on top of more stable price performance.

LVHD’s portfolio consists of anywhere between 50 and 100 stocks that feature not just lower volatility, but also higher dividends. The ETF screens a universe of 3,000 stocks for companies that pay “relatively high sustainable dividend yields.” It then scores their stocks higher or lower based on price and earnings volatility. From there, it caps any stock’s weight at rebalancing at 2.5%, and any sector’s weight at 25% (except real estate investment trusts, which can never exceed 15% of the fund). Those percentages can move between rebalancing as stocks rise and fall.

Legg Mason Low Volatility High Dividend currently is heaviest in two low-vol mainstays – utilities (26.4%) and consumer staples (18.2%) – with additional double-digit holdings in real estate (15.0%) and consumer discretionary (10.3%). Top holdings are a who’s who of rock-solid companies, such as McDonald’s (MCD), Kimberly-Clark (KMB) and electric utility Duke Energy (DUK).

How effective is this strategy? Well, during the messy fourth quarter of 2018, Legg Mason’s fund lost just 5.42% while the S&P 500 tanked by 13.52%, according to data from Morningstar.

Learn more about LVHD at the Legg Mason provider site.

• Type: Value stock
• Market value: $17.2 million
• Dividend yield: N/A*
• Expenses: 0.39%

Several market experts have voiced a preference for value over growth in the year ahead. LPL Financial Research writes, “We expect value in 2019 to benefit from the pickup in economic growth that began in mid 2018, relatively attractive valuations after a sustained period of growth outperformance, and our positive view of financials.”

However, while most value ETFs consider metrics such as price-to-earnings (P/E) or price-to-sales (P/S), investors might want to consider a fresh-faced fund that looks at value through a different lens.

“The pages on revenue recognition are 700 pages; 70% of the S&P now reports non-GAAP (generally accepted accounting principles) earnings; GE printed four different versions of non-GAAP EPS. So if you use P/E to compare valuation across companies, it has just become more and more difficult,” says Thomas Cole, CEO and co-founder of Distillate Capital, a Chicago-based fundamental value investment manager. “So we settled ultimately on a measure of free cash flow to enterprise value. Stocks that look the least expensive in that metric handily outperform the market. Stocks that look the most expensive tend to underperform.”

The Distillate U.S. Fundamental Stability & Value ETF (DSTL, $23.60) has one thing in common with LVHD in that they’re both designed to reduce risk. However, DSTL does it by selecting stocks using the aforementioned measure of value and by examining companies for long-term stability (which includes stable cash flows and low debt leverage).

“A lot of times Wall Street has a tendency to think of risk and valuation in separate buckets,” Cole says. “You can run risk models all day long, correlation vs. stocks, how rates change, all sorts of scenarios … but most of the time those conversations take place without a conversation about whether you’re paying too much for something.”

At the moment, DSTL is heaviest in information technology stocks (31.9%). In fact, seven of the 10 largest holdings are tech stocks, including top weights Apple (AAPL), Microsoft and Alphabet (GOOGL). The fund also has significant weights in industrials (20.2%), health care (17.3%) and consumer discretionary (12.9%).

* 12-month yield not available; fund launched on Oct. 23, 2018.

Learn more about DSTL at the Distillate Capital provider site.

• Type: Foreign large-cap blend stock
• Market value: $10.9 billion
• Dividend yield: 3.2%
• Expenses: 0.11%

Investors have long heard the adage “don’t put all your eggs in one basket.” Market experts frequently preach the virtues of portfolio diversification – not just among U.S. sectors, but geographically, too.

“A globally diversified portfolio – one that puts its eggs in many baskets – tends to be better positioned to weather large year-over-year market gyrations and provide a more stable set of returns over time,” writes Anthony Davidow, CIMA, Vice President, Alternative Beta and Asset Allocation Strategist, Schwab Center for Financial Research.

Just as investors can get cheap, broad-based U.S. equity exposure with the VTI, they can own a wide swath of global stocks for roughly a penny on the dollar with Vanguard Total International Stock ETF (VXUS, $48.90). VXUS provides access to nearly 6,400 international stocks from several dozen countries – primarily across developed Europe (41.4%), developed Pacific (29.9%) and emerging markets (21.3%) such as China and India.

VXUS gets you invested in nearly every corner of the world, but it’s again like VTI in that the largest companies in the world have the biggest say on its performance. That means there’s plenty of heft from European blue chips such as Nestle (NSRGY) and Royal Dutch Shell (RDS.A), as well as growing Chinese tech titans such as Tencent (TCEHY) and Alibaba (BABA).

This global index fund is a top ETF for 2019 because it offers diversification in a year in which successful single-country bets could be especially tough to pull off. And it also has earned a spot among Kiplinger’s 20 best buy-and-hold ETFs – the Kip ETF 20 – thanks to both its high quality and dirt-cheap 0.11% expense ratio.

Learn more about VXUS at the Vanguard provider site.

• Type: International large-cap growth and dividend stock
• Market value: $61.0 million
• Dividend yield: 2.5%
• Expenses: 0.58%

Typically, the term “dividend growth” will signal that a fund holds companies that regularly increase their dividend payouts. That’s not quite the case with WisdomTree Global ex-U.S. Quality Dividend Growth Fund (DNL, $50.61)

Instead, the DNL is an international growth-stock fund that also views dividend programs as a means of identifying quality. And while quality should be important most years, it’ll be especially important in a 2019 in which global growth is slowing and experts are mixed on the outlook for overseas stocks.

The focus on dividends unsurprisingly results in a mostly large-cap fund with an average market value of $15 billion. Just don’t expect terribly high income – its yield is close to that of the S&P 500.

This Kip ETF 20 pick identifies “dividend-paying companies with growth characteristics in developed and emerging equity markets, ex-U.S.” Its holdings span 33 countries with significant weights in Japan (12.8%), the United Kingdom (11.3%), Sweden (7.0%), Norway (6.8%) and Switzerland (6.7%). Top holdings include European Dividend Aristocrat British American Tobacco (BTI), Norwegian telecom Telenor (TELNY) and Japanese semiconductor company Tokyo Electron (TOELY).

Learn more about DNL at the WisdomTree provider site.

• Type: Sector (Technology)
• Market value: $852.1 million
• Dividend yield: 3.0%
• Expenses: 0.50%

While it’s good to have a few broad-market funds to keep the ship more or less in line with the market, you can also use sector and industry funds to try to generate “alpha” (essentially, doing better than the index).

Essentially since the Great Recession, the tech sector has been a hardly-misses growth play thanks to the increasing ubiquity of technology in every facet of everyday life. That’s not just the increasing use of gadgets such as smartphones, tablets and laptops, but also the sprawl of tech such as semiconductors and cloud technology into all other areas, from health care to automobiles to household appliances.

That said, technology stocks roundly sold off in the final quarter of 2018 as a confluence of headwinds and uncertainty hit, prompting investors to lock in profits. Still-high valuations may cause investors to do the same in 2019 should volatility rise again, which is why a conservative tack might pay off here.

The First Trust Nasdaq Technology Dividend Index Fund (TDIV, $33.94) is a play on the sector’s more established companies. TDIV holds nearly 100 dividend-paying technology and telecommunications companies of $500 million in market value or greater that have passed a few screens, including delivering at least one dividend in the past 12 months and yielding more than 0.5%.

The fund is about 80% tech and 20% communications, and uses a modified market-cap weighting methodology that considers both market value and dividend value, with caps to keep stock concentrations from getting too high. TDIV still is heavily weighted in several stocks – its top 10 holdings, which include 8%-plus weights in Intel (INTC) and International Business Machines (IBM) -- make up 58% of the fund.

Many of TDIV’s holdings are potential rebound plays in 2019. But even if the market remains choppy in 2019, this ETF’s much-better-than-average yield should provide investors with some ballast.

Learn more about TDIV at the First Trust provider site.

• Type: Thematic (Robotics and automation)
• Market value: $1.2 billion
• Dividend yield: 0.37%
• Expenses: 0.95%

Every other week, you read a story about how the machines are taking over the world, whether it’s medical surgery-assistance robots, heavily automated factories or virtual assistants infiltrating the living room. These make for interesting stories (albeit depressing ones if you’re worried about holding onto your job) … but they also make for a fantastic investing opportunity.

The robotics and automation industries are chock full of growth. Technavio expects the global robotics market to more than double from $32 billion in 2017 to more than $77 billion in 2022. Mordor Intelligence projects a compound annual growth rate of 24.52% in the global robotics market between 2018 and 2023. Zion Market Research sees the global automation market hitting $321.9 billion by 2024 – up from $2017.2 billion in 2017. The numbers vary, but the direction is clear: It’s up.

The Robo Global Robotics & Automation Index ETF (ROBO, $34.05) is a so-called “thematic” ETF that spans multiple sectors/industries to tackle a single trend. In this case, it’s the increased reliance on automation and robotics in the American workplace and beyond.

ROBO, which has racked up more than $1 billion in assets since inception in 2013, is a 94-holding portfolio with a 50-50 split. Half the weight goes toward businesses that are benefitting from automation, such as manufacturing and industry (15%), health care (10%) and logistics automation (9%). The other half goes toward the technologies powering these changes, including computing, processing & AI (19%), actuation (12%) and sensing (12%). Holdings include the likes of FLIR Systems (FLIR), which designs things such as thermal imaging cameras and imaging sensors; Brooks Automation (BRKS), which provides automation and instrumentation equipment; and Intuitive Surgical (ISRG), which we’ve featured as one of 2019’s best health-care stocks because of its growing ubiquity; more than 1 million procedures were performed with da Vinci Surgical System machines in 2018.

“We are in the middle of a robotics arms race,” William Studebaker, President and CIO of fund provider ROBO Global, said in 2018. “These are technologies that companies need to invest in to stay relevant. When you look across all industries, the pace of investment is only accelerating.”

Learn more about ROBO at the ROBO Global provider site.

• Type: Industry (Biotechnology)
• Market value: $4.0 billion
• Dividend yield: 0.3%
• Expenses: 0.35%

The SPDR S&P Biotech ETF (XBI, $80.12) is a fantastic way to invest in the biotechnology space for several reasons – among them, the “virtuous cycle” of biotech M&A.

Often, when an ETF tracks an index, companies exit that index by “falling out.” For instance, their stock may decline (weighing down the fund’s performance) to the point where their market value isn’t large enough to remain in the index. But another way a stock can leave an index is if it’s suddenly bought out – and typically that index will benefit by the sudden jolt in the share price thanks to the buyout premium. That stock then must be replaced – usually by an up-and-comer that’s heading in the right direction (up).

The XBI is a portfolio of 120 biotechnology stocks that uses a modified equal-weighted methodology. So rather than most cap-weighted funds in which the biggest stocks have the greatest say, XBI allows biotech stocks of all sizes – large, medium and small – to have similar influence on the fund. As a result, the top 10 holdings include $7 billion Loxo Oncology (LOXO) … as well as $61 billion Celgene (CELG), which recently soared on a buyout bid from Bristol-Myers Squibb (BMY) and will have to be replaced in XBI’s index should the deal go through.

XBI is not only better positioned to benefit from that “virtuous cycle” of M&A (which typically involves much smaller companies than Celgene), but also from the bigger stock jumps that smaller biotech stocks enjoy on drug-trial successes. The negative flip side to be aware of, of course, is that they can suffer from the greater down-gaps when a trial falls short.

As a special mention here: Investors looking for a more balanced health-care fund should consider the Invesco S&P 500 Equal Weight Health Care ETF (RYH) – a Kip ETF 20 pick that you can read more about here.

Learn more about XBI at the SPDR provider site.

• Type: Sector (Consumer discretionary)
• Market value: $35.0 million
• Dividend yield: 1.4%
• Expenses: 0.40%

U.S. economic growth may be poised to slow in 2019, but that’s still expansion, and Americans are continuing to see their wages grow while broadly shouldering slightly lower IRS burden following late 2017’s tax overhaul. That’s good news for the consumer discretionary sector at large – if Americans have extra money to spend, these are the products and services companies they’ll likely spend it on.

But not all consumer stocks are built equally. For instance, the brick-and-mortar mall herd is quickly getting thinned – Sears (SHLDQ) is on the brink of extinction, JCPenney (JCP) reached penny-stock status in last year and Macy’s (M), which rebounded last year, showed regression to start 2019 by reporting a weak holiday period. Thus, a quality consumer discretionary ETF needs to be properly positioned in the “right” stocks.

The John Hancock Multifactor Consumer Discretionary ETF (JHMC, $29.73) currently is heavily weighted in many of the best-positioned consumer plays. The JHMC tracks a multifactor index that emphasizes “factors (smaller cap, lower relative price, and higher profitability) that academic research has linked to higher expected returns.”

Tops among JHMC’s 145 holdings are the likes of Amazon.com (AMZN), the ubiquitous e-commerce play that continues to grow by double digits and also benefits from the expansion of cloud computing; Home Depot (HD) and Lowe’s (LOW), whose home-improvement businesses have so far remained mostly shielded from Amazon’s sprawl; and media and entertainment darling Walt Disney (DIS).

But what’s also attractive about JHMC is how many of its larger weights go to companies that can still do well even if Americans’ spending is crimped. Amazon boasts deep retail discounts, as well as its cost-saving Prime program (TV, movies, music and free shipping for $119 per year); McDonald’s is the king of cheap fast food; and Dollar General (DG) plays to the tightest of budgets.

Learn more about JHMC at the John Hancock provider site.

• Type: Industry (Energy exploration and production)
• Market value: $2.4 billion
• Dividend yield: 1.0%
• Expenses: 0.35%

Oil prices looked like they would celebrate a considerable win for much of 2018. However, West Texas Intermediate and Brent crude oil tanked in the final quarter over concerns about weak global demand, a supply glut and the inability for OPEC cuts to stabilize the energy market.

But several analysts believe oil will rebound in 2019. That includes BofA Merrill Lynch, which said in its 2019 look-ahead, “The outlook for commodities is modestly positive despite a challenging global macro environment. We forecast Brent and WTI crude oil prices to average $70 and $59 per barrel, respectively in 2019.” Those figures would translate into respective gains of 30.1% and 25.2% compared to their final 2018 prices.

But some energy companies are more sensitive to changes in commodity prices – including exploration and production (or “upstream”) firms. These companies are responsible for the relatively higher-risk business of finding, extracting, producing and selling oil and gas. These companies each have a “breakeven price” – how much a barrel (oil) or million BTUs (natural gas) must sell for to cover the costs of production; prices above that line result in profits, while prices below result in losses.

The SPDR S&P Oil & Gas Exploration & Production ETF (XOP, $30.42) is the largest E&P-focused ETF on the market. XOP tracks a modified equal-weighted index of exploration and production firms that ensures large, mid- and small-cap stocks all have decent representation in the fund, and also makes sure no one stock dominates the ETF’s performance. For instance, $2.0 billion QEP Resources (QEP) is the top weight in the fund at 2.13%, while $17.1 billion Diamondback Energy (FANG) is No. 8 at 1.95%.

Because of its price sensitivity to oil, XOP tends to crater harder than broader energy funds such as the Energy Select Sector SPDR ETF (XLE) when energy dips; XOP fell 39.3% in the final quarter of 2018 compared to 25.3% for the XLE. But it also tends to gain much more when energy prices are on the upswing, making it a better play on a 2019 rebound.

Learn more about XOP at the SPDR provider site.

• Type: Sector (Energy)
• Market value: $28.0 million
• Dividend yield: 0.2%
• Expenses: 0.29%

Another magnified play on the price of energy is the Invesco S&P SmallCap Energy ETF (PSCE, $10.21) – a tight portfolio of 37 small-cap energy stocks that average less than $2 billion in market value, compared to nearly $19 billion for the XOP.

In general, small-cap stocks tend to have higher growth prospects thanks to the law of large numbers (it’s much easier to double revenues from, say, $1 million than it is to double them from $1 billion). But they’re also naturally riskier, typically boasting narrower operations and having far less access to capital than their larger-cap brethren.

PSCE does hold some refining and pipelines businesses that aren’t as clearly tied to the price of oil and gas. However, it also holds E&P firms, and most importantly, more than half its portfolio (53%) is made up of equipment and services companies that also tend to be sensitive to energy prices. It’s also more lopsided, with six stocks at weights of 4% or more, including PDC Energy (PDCE) at a significant 8.4%. So single-stock risk is more of a concern here.

But if you go into PSCE with your eyes open, you can do well in an energy-market upturn. Even the first couple of weeks of 2019 have been kind to this fund, which has ripped off 16.5% gains compared to 7.8% for the XLE.

Learn more about PSCE at the Invesco provider site.

• Type: Sector (Real estate)
• Market value: $28.8 billion
• Dividend yield: 4.7%
• Expenses: 0.12%

Real estate investment trusts (REITs) were created by law in 1960 as a way to open up real estate to individual investors. REITs typically own and operate real estate and are exempted from federal taxes … but in exchange must pay out at least 90% of their taxable income to shareholders in the form of dividends. This makes them very popular with income seekers, though as a result they also tend to struggle a bit when interest-rates rise (or when investors believe they will rise).

But the landscape for REITs is becoming a little friendlier. The Federal Reserve has already signaled a slower pace of interest-rate hikes in 2019, and recent comments from various Fed officials have displayed a more dovish stance.

The Vanguard REIT ETF (VNQ, $77.49) is the largest REIT ETF in existence, with its $28.8 billion in assets under management dwarfing the next-closest competitor, the Schwab US REIT ETF (SCHH, $4.6 billion in AUM). That’s thanks in large part to its long life (inception in 2004) as well as its 0.12% expense ratio, which is 90% lower than the average fees of similar funds.

VNQ holds a wide basket of roughly 190 REITs that covers the spectrum of real estate, from apartment buildings and offices to malls, hotels and hospitals. In this ETF, you’ll find companies such as communications-infrastructure play American Tower (AMT), mall owner and operator Simon Property Group (SPG), self-storage specialist Public Storage (PSA) and data center REIT Equinix (EQIX).

Investors should note that VNQ’s current yield of 4.7% sits at the very high end of its 10-year range.

Learn more about VNQ at the Vanguard provider site.

• Type: Sector (Real estate)
• Market value: $347.5 million
• Dividend yield: 8.6%
• Expenses: 0.35%

The Invesco KBW Premium Yield Equity REIT Portfolio (KBWY, $30.17) is one of the best ETFs to buy if you’re looking for a high current yield. VNQ’s payout is great compared to most equity funds, but KBWY’s, at well north of 8%, is downright gaudy.

Just understand that you typically don’t earn dividend yields that high without some added measure of risk.

The KBWY holds a cluster of just 30 small- and mid-cap REITs that include the likes of Office Properties Income Trust (OPI), which leases office space to government entities and other high-quality tenants; and MedEquities Realty Trust (MRT), which owns acute-care hospitals, short-stay and outpatient surgery facilities, physician group practice clinics and other health-care properties. It’s a concentrated portfolio, too, with more than a quarter of all assets piled into just the top five holdings.

These REITs offer higher yields in part because of their higher risk profiles. However, this ETF’s yield also has ballooned thanks to rough losses over the past couple years; the fund has declined nearly 20% since the start of 2017. (Yields, after all, are just dividends divided by the share price, so as the share price shrinks, yields grow.)

But KBWY investors may be richly rewarded with a 1-2 punch of performance and income should REITs in general outperform in 2019.

Learn more about KBWY at the Invesco provider site.

• Type: International industry (Internet and e-commerce)
• Market value: $329.9 million
• Dividend yield: 0.0%
• Expenses: 0.86%

While most sector, industry and thematic ETFs tend to be U.S.-centric, investors can also get global (U.S. and international) and even purely international exposure to specific businesses and trends.

• The Emerging Markets Internet & Ecommerce ETF (EMQQ, $28.04) is one of the most exciting such funds, holding roughly 60 companies dealing in online search, e-commerce, streaming video, cloud computing and other internet businesses in countries such as China, South Africa, India, Russia and Argentina. This high-horsepower play is driven by the increasing spending power of emerging markets’ growing middle classes. For instance, 451 Research, in its Global Unified Commerce Forecast, predicts a more than 20% CAGR in digital commerce transactions through 2022, when they’ll reach $5.8 trillion.

That said, a disclosure, and a mea culpa: EMQQ was in fact a recommendation in last year’s list of the best ETFs for 2018 … and it was a dog, dropping roughly 30%.

What went wrong?

Emerging markets broadly sold off hard last year amid China’s trade war with the U.S. and worries about a slowdown in growth across numerous major global markets – including China, which is home to more than 60% of EMQQ’s holdings. Top EMQQ holdings such as Chinese e-commerce play Alibaba, China search specialist Baidu (BIDU) and Russian internet company Yandex (YNDX) all produced several earnings beats last year and have analysts projecting breakneck growth ahead. But many of these stocks had reached high valuations after red-hot runs, and so despite fundamental strength in their underlying companies, they pulled back precipitously as investors locked in profits amid the uncertainty.

If emerging markets (and especially China) struggle once more in 2019, EMQQ will pay the price. But a resolution to the U.S.-China trade spat, as well as any better-than-expected economic growth in EMs, should light a fire under this ETF.

Learn more about EMQQ at the EMQQ provider site.

• Type: Industry (Cannabis)
• Market value: $768.4 million
• Dividend yield: 2.2%
• Expenses: 0.75%

2018 was a breakout year for the budding (sorry) marijuana industry.

A growing tide, here and abroad, is bringing cannabis to the mainstream. Roughly two-thirds of the U.S. have legalized marijuana use for at least medical, if not recreational, purposes. That’s roughly the same ratio as the mix of Americans who are in favor of legalizing marijuana, according to a 2018 Gallup poll. Meanwhile, Canada last year became the largest legal marketplace for marijuana.

All this has stirred up a hornet’s nest of activity in medical marijuana companies. Canadian pharmaceutical and cannabis company Tilray (TLRY) spiked by well more than 800% year-to-date at one point in 2018, and spent December forging partnerships with Swiss pharma giant Novartis (NVS) and mega-brewer Anheuser-Busch InBev (BUD). Beer, wine and spirits titan Constellation Brands (STZ), which took a 9.9% stake in major cannabis producer Canopy Growth (CGC) in October 2017, quadrupled down on its bet with a $4 billion investment in 2018 to up its stake to 38%. Marlboro maker Altria (MO) spent $1.8 billion to buy a 45% interest in producer Cronos Group (CRON) late last year.

Clearly, marijuana is becoming big business, with plenty of fortunes to be made. But Wall Street analysts are only really beginning to scour this industry, so mom-and-pop investors are fairly short on reliable information. You could try to pick from among marijuana stocks. Or you could spread your bet across several companies via the ETFMG Alternative Harvest ETF (MJ, $31.29).

MJ has actually been around for a few years, racking up a respectable $770 million or so in assets under management since inception in 2015. The fund has 37 holdings – a wide array for such a relatively new industry – though it’s extremely top-heavy. At the moment, Cronos makes up 13.4% of net assets, Canopy Growth another 8.8%, Tilray 7.6% and Aurora Cannabis 7.4%.

Other top holdings include some interesting takes on the cannabis space, including organic cannabis producer Green Organic Dutchman (TGODF), medical marijuana producer CannTrust Holdings (CNTTF) and GW Pharmaceuticals (GWPH), whose multiple sclerosis treatment Sativex was the first cannabis-based drug to gain FDA approval.

Learn more about MJ at the ETFMG provider site.

• Type: Active intermediate-term bond
• Market value: $3.0 billion
• SEC yield: 3.6%*
• Expenses: 0.55%

Investors looking for protection sometimes look to bonds, which typically don’t produce the caliber of growth that stocks offer, but can provide decent income and some sort of stability.

That said, the rising-rate environment of the past couple of years has weighed down bonds and bond funds, as bond prices and yields move in opposite directions. And an uncertain year ahead for bonds, given the Federal Reserve’s shifting stance, means that investors may need a defter touch than what a basic index fund can provide.

• SPDR DoubleLine Total Return Tactical ETF (TOTL, $47.57), a Kip ETF 20 component, is an actively managed ETF that seeks to outperform the Bloomberg Barclays US Aggregate Bond Index benchmark in part by exploiting mispriced bonds, but also by investing in certain types of bonds – such as junk and emerging-markets debt – that the index doesn’t include.

The portfolio breakdown is certain to change over time as market conditions fluctuate. But as of this writing, nearly half of TOTL’s assets were invested in mortgage-backed securities (MBSes, 49.7%), another 19.8% was placed in U.S. Treasuries and 8.5% was in EM debt. TOTL also holds commercial MBSes, bank loans, investment-grade corporate bonds, junk debt and asset-backed securities.

The ETF’s bonds are high in quality, with nearly 69% of the fund’s debt earning the highest possible credit grade (Aaa). Only 19% of the holdings have junk status or are unrated. And the duration of 4.3 years implies that a one-percentage-point increase in interest rates would cause the ETF to decline by about 4.3%.

Investors at the moment are earning a substantial 3.6%, not to mention harnessing the brainpower of sub-adviser DoubleLine Capital in navigating future changes in the bond market.

* SEC yield reflects the interest earned after deducting fund expenses for the most recent 30-day period and is a standard measure for bond and preferred-stock funds.

Learn more about TOTL at the SPDR provider site.

• Type: Active short-term bond
• Market value: $225.3 million
• SEC yield: 3.7%
• Expenses: 1.02%

Investors who are particularly worried about interest-rate hikes wreaking havoc in the fixed-income part of their portfolio can turn to the Pimco Enhanced Low Duration Active Exchange-Traded Fund (LDUR, $98.68) – another active bond fund among the ranks of the Kip ETF 20.

This fund is helmed by Pimco veterans Hozef Arif, David Braun and Jerome Schneider, who boast a combined 62 years of investment experience. Their task is to keep duration low, which will keep the fund from moving much when interest rates change. An effective duration of just 1.3 years across the portfolio means that a one-percentage-point change in interest rates would cause the portfolio to lose a mere 1.3%.

Often, shorter-term bonds offer skimpier yields, but LDUR is able to offer a nice payout of 3.7% thanks to its holdings in mortgage-backed securities, investment-grade corporates and EM debt.

Learn more about LDUR at the Pimco provider site.

• Type: Commodity (Gold)
• Market value: $430.6 million
• Dividend yield: N/A
• Expenses: 0.17%

Gold bulls will tout several benefits of investing in the yellow metal. It’s certainly an uncorrelated asset that doesn’t move perfectly with or against the stock market, and it’s often thought of as a hedge against inflation, as well as a safe haven against economic and political uncertainty. Plenty of experts will tell you, in fact, that most portfolios could use a 1% to 5% allocation in gold for added diversification.

Gold is off to its worst start to a year since 2013, but a few experts do think the metal still could rise in 2019. One of the biggest drivers is the U.S. dollar – gold is priced in dollars, so if the currency gains in value, that actually depresses the price of an ounce of gold. However, certain potential outcomes in 2019, such as the Federal Reserve pulling back the throttle on interest-rate hikes, could suppress the dollar, and thus help out gold.

“We see gold likely repricing lower through the middle of next year, at which point the Fed’s policy will move into restrictive territory,” writes Natasha Kaneva, Head of Metals Research & Strategy at JPMorgan, in the analyst firm’s 2019 gold outlook. “The curve will invert, the expansion will slow and expectations of Fed easing will build. At this juncture, we would expect real rates to move lower and gold’s fortunes to reverse, as gold tends to benefit from consistent drop in real yields during the lead up to recessions and thereafter.”

But physically holding real gold is an expensive chore – you have to get it delivered, have somewhere to store it and insure it, not to mention the costs associated with finding a buyer and unloading it when you want to sell. Thus, many investors tend to invest in gold via ETFs instead.

Shares of the GraniteShares Gold Trust (BAR, $128.83) represent 1/10th of an ounce of physical gold stored in vaults, so it’s a very direct way to participate in any upside in gold.

The GraniteShares Gold Trust also is the cheapest option on the market – again. BAR actually came to market in August 2017 as the cheapest such ETF with an expense ratio of 0.2%, but in June 2016, SPDR launched the SPDR Gold MiniShares Trust (GLDM) at just 0.18%. BAR took over as the low-cost leader by lowering its fees to 0.17% in October 2018.

Learn more about BAR at the GraniteShares provider site.

• Type: Inverse stock
• Market value: $2.3 billion
• Dividend yield: 1.01%
• Expenses: 0.89%