3 Ways to Collect Dividends From a College Education

College is an increasingly important right of passage in the United States, and it's increasingly easy to collect dividends from students heading off to college without the risk of student IOUs.

Feb 8, 2014 at 7:00AM


Don't let the college kids have all the fun!

Investing in education is relatively easy in the United States. You can go to college, you can invest in a for-profit college like Apollo Education (NASDAQ:APOL), or, if you like collecting dividends, you can buy American Campus Communities (NYSE:ACC), Education Realty Trust (NYSE:EDR), or Campus Crest Communities (NYSE:CCG).

Kids will be kids
The number of college-age "kids" (those 18 to 24) hit a nadir in 1997 but then started to move solidly higher. Although the college-age population is set to fall off a little and then plateau before inching back up in another 10 or 15 years, there's still plenty of opportunity.

Between 1980 and 2010, the percentage of college-age kids attending college increased from 25% to over 35%. So, more kids are attending college today than 30 years ago. And that trend isn't likely to change, because getting ahead in this country is increasingly about knowledge-based work. Total enrollment is expected to continue on an upward trajectory.

On the surface, that should make a for-profit college like Apollo a good investment. But Apollo and the other for-profits have big problems. Increasing regulatory scrutiny, the currently negative perception of their offerings, and student payment concerns are key issues to watch. While Apollo has been around for decades and is probably one of the better for-profits, its top and bottom lines have fallen notably over the past two years, and the tide has yet to turn.

It would be much better if you could invest in not-for-profit schools in some way. Such institutions don't face the same issues and should benefit more from the student trends noted above. But you can't buy shares in Texas A&M or Arizona State University.

Buying a bed
While you can't buy shares in a not-for-profit college, you can buy shares in real estate investment trusts (REITs) that own housing in and around such campuses. For example, American Campus has properties at the two schools above. Education Realty and Campus Crest are two other student housing REIT options.


Campus Crest's Copper Beech concept.

The best part is students, don't pay rent with a loan. Sure, they may use money from a loan, but Campus Crest, Education Realty, and American Campus get paid as services are rendered, so there's no debt concerns. And as long as this trio focuses on decent colleges, housing demand should remain strong -- particularly for properties located on school grounds. That's a big avenue for growth.

Bringing in third parties to build and operate student housing is an increasingly important option as colleges look to keep costs down and quality high. For example, in September, American Campus broke ground on an expansion at its on-campus housing development at Northern Arizona University. Campus Crest is building a new facility on a property leased from the University of Pennsylvania. And Education Realty is set to provide an addition 1,500 or so beds to the University of Kentucky in 2015.

Education Realty's Kentucky press release sums up the opportunity for these REITs for both on-campus and off-campus housing when it explained the college was partnering with it to "...replace outdated residence halls..." Thirty-year-old student housing doesn't compete well with newer or at least modernized product. So even in locations with plenty of student housing, these REITs can find a competitive edge, using institutional access to capital to differentiate their properties.

An alternative eduction
Earning dividends from a college education is as easy as buying student housing REITs such as American Campus, Education Realty, or Campus Crest. That's safer than owning a for-profit college, and a heck of a lot easier than going back to school. As more and more kids head off to college, look for this trio to keep growing their portfolios and sending out a steady stream of dividend checks.

Three great dividends from big time companies
If you're looking for some long-term investing ideas, you're invited to check out The Motley Fool's brand-new special report, "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so simply click here now and get your copy today.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information