Today when looking through the latest section of Value Line I noticed Host Hotels and Resorts (HST). This is an REIT which owns hotels operated by Hyatt, Hilton, Fairmont, and others. (Note, an REIT, or Real Estate Investment Trust, is like a mutual fund of properties. Most specialize in a certain area, such as commercial buildings, apartments, or even storage lockers. These are an easy way for an investor to get involved with real estate.)
The things that drew my attention were the potential price appreciation, the high level of current momentum, and the dividend yield. Note that the dividend is fairly low compared with some other REITs (2.4%), but it has been growing over the last couple of years and is certainly better than a savings account or money market fund right now. If the hotel industry continues to recover and flourish, this REIT might have a nice return over the next few years. This will probably not be a stellar grower over long periods of time when compared with high growth equities (although the returns from REITs have certainly not been shabby recently), but it could balance out a portfolio of growth stocks and add some diversification to smooth out returns a bit.
In considering where to place an REIT in one’s accounts, realize that they will be generating regular income. To save on taxes, it is best to shelter them from income taxes – i.e., place then in an IRA or a Roth IRA where the dividends can be reinvested tax deferred or tax-free, respectively. Taxable accounts should contain growth stocks that pay little or no dividend and ETFs in equities that also provide meager dividends.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.