Depending on your investing strategy, you might take (partial) profit off from a holding that has become excessively overvalued or choose to hold on to them as a part of your portfolio for safe income.
However, certainly, when stocks have become pricey as Realty Income (NYSE:O) and Welltower (NYSE:WELL) have, it doesn’t make sense to buy shares, as they’ll likely deliver lackluster returns in the near term. Instead, wait until their valuations have returned to more reasonable levels for a bigger margin of safety and a higher initial yield.
Investors often buy blue-chip REITs for their above-average and generally safe dividends. It’s difficult to say goodbye or even take partial profits from SWAN (sleep well at night) REITs when they have done well.
It’s wonderful if you bought them at a low price when they’re undervalued. But what do you do when they have run up and become excessively overvalued?
Why Realty Income is a Great Dividend Stock
Realty Income is a component of the S&P High Yield Dividend Aristocrats Index and the S&P 500 Index and offers a market-beating dividend yield. There’s no question the REIT has top-notch quality.
First, it’s one of the few if not the only REIT that has an “A-grade” credit rating. S&P gives Realty Income a credit rating of “A-.”
Second, over half a century, Realty Income has built an empire of about 5,800 commercial properties from which it collects stable rental income. These properties are diversified across 48 industries, 49 states, and diversified geographically across …
Unfortunately, we have maxed the word limit for this excerpt. But you can read the full Seeking Alpha article here and find out when’s a good time to buy these great REITs: 2 Great REITs Priced For Low Returns
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Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.
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