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Big Dividend Yields We Wouldn't Buy for Today

What do National Retail Properties (NYSE: NNN  ) and Public Storage (NYSE: PSA  ) have in common?

REITs are known for their big dividend yields -- by law, 90% of their earnings have to come back out to shareholders. But the chase for yield can be daunting, especially with so many other investors willing to pay higher and higher prices just to receive a repeatable dividend.

In the following video, Motley Fool contributors Jordan Wathen and Patrick Morris explain why National Retail Properties and Public Storage might not be the best dividend stocks to buy now.

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Read/Post Comments (2) | Recommend This Article (6)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 25, 2014, at 4:35 PM, Blackhawk wrote:

    I'm not the smartest turnip that fell off the back of the truck................

    Would/could someone explain to me in Jordan's short bio above what it means 'cause I think some editing may be required.

    "A strong believer in the idea that great companies outnumber great stocks. It's all about valuation."

    Math wise I think this would be an equivalent!!!!! Is this not the whole premise of MF........great companies = great stocks.

    I dunno......just Foolin"


  • Report this Comment On July 30, 2014, at 9:23 AM, TMFValueMagnet wrote:

    Blackhawk, you mentioned mathematics, so let's use some math.

    Let's say a great business can generated a 20% return on invested capital in perpetuity, and its potential market size is 100x its current revenue line. I agree -- this is a business on which you could pay any pricetag and eventually have a great investment. Eventually.

    However, I have a very strong value bent. Some investors might be willing to pay 5x book for a company like that. I'm not particularly interested in paying that price.

    My view is simple: the bigger your "trash pile" (stocks you pass up), the better your potential for total returns in excess of the market averages. This, of course, requires turning over thousands of rocks to find true gems that the market hasn't yet found.

    So, from my perspective, there are a great number of amazing companies that, because of valuation, aren't great stocks. Maybe if they fit my strict value parameters in the future, they'd fit my requirements for "great stocks."

    Just a difference in application, that's all.

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Jordan Wathen

"The liabilities are always 100 percent good. It’s the assets you have to worry about." - Charlie Munger

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Related Tickers

8/28/2015 4:07 PM
NNN $35.83 Down -0.02 -0.06%
National Retail Pr… CAPS Rating: *****
PSA $206.16 Down -1.85 -0.89%
Public Storage CAPS Rating: ****