The Best Diversified REITs of 2011

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As we approach the end of a tumultuous 2011, it's time to look back at the biggest winners and losers.

So in this series, that's exactly what we're doing, sector by sector. Today, let's take a look at the biggest diversified REIT winners. First the backstory; then the results.

The backstory
This year, we saw U.S. Treasuries get downgraded from AAA status while Congress played politics instead of fixing the budget, a domestic economy that has been recovering from its financial crisis in fits and starts, big trouble in Europe, and a Chinese economy that doesn't seem so bulletproof.

The daily volatility in the financial industry has been tremendous, but REITs haven't been swinging around as wildly as banks. Part of that is European debt fears manifesting in bank stock volatility, but the REITs have also been less volatile because of the dividend yields that are a hallmark of the sector. This is because a REIT has to pay out 90% of its taxable income to keep its favorable tax status.

Another thing to keep in mind with REITs is that most are heavily leveraged. As a result, any change in the Federal Reserve's actions to keep interest rates low could hurt future debt refinancings.

The best diversified REIT stocks of 2011
For context, the S&P 500 has returned 2.4% after dividends this year. In other words, the market has been basically flat.


2011 Dividend-Adjusted Return

Price-to-Tangible Book Value

Retail Opportunity Investments (Nasdaq: ROIC  ) 23.5% 1.4
Colonial Properties Trust (NYSE: CLP  ) 18.2% 1.5
One Liberty Properties (NYSE: OLP  ) 9.2% 1.1
Excel Trust (NYSE: EXL  ) 4.2% 1.4
PS Business Parks (NYSE: PSB  ) 3.5% 2.3
Liberty Property Trust (NYSE: LRY  ) 3% 1.7

Source: S&P Capital IQ.

There were no home-run diversified REIT winners in 2011, but each of these six beat the market. They were helped by their dividend yields, which currently range from 2.9% to 7.7%.

As for a possible opportunity among these stocks, my fellow Fool Jim Royal believes the best performer of 2011 may still be a good buy despite the run-up.

If you're looking for other opportunities in the financial space, let me leave you with a regional bank that has some of the best operational numbers I've ever seen. I wrote about it in our brand new free report: "The Stocks Only the Smartest Investors Are Buying." I invite you to take a free copy to find out the name of the bank I believe Warren Buffett would be interested in if he could still invest in small banks.

Anand Chokkavelu doesn't own shares of any company mentioned. The Motley Fool owns, and Motley Fool newsletter services have recommended buying, shares of Retail Opportunity Investments. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (1) | Recommend This Article (6)

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  • Report this Comment On January 02, 2012, at 8:10 PM, neamakri wrote:

    I can only speak for OLP which I purchased a couple of years ago.

    First, they currently pay out 167% of their earnings; not a good sign.

    Second, they paid my dividend in STOCK, not money. This was in direct conflict with my original purchase request with Schwab. OLP is the only company that ever did this.

    Just letting fellow Fools in on the truth.

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12/31/1969 7:00 PM
CLP.DL $0.00 Down +0.00 +0.00%
Colonial Propertie… CAPS Rating: ***
EXL.DL $0.00 Down +0.00 +0.00%
Excel Trust CAPS Rating: No stars
LPT $40.08 Down -0.22 -0.55%
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OLP $23.85 Down -0.06 -0.25%
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PSB $107.42 Down -0.74 -0.68%
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