Many investors have recently fled from high dividend paying real estate investment trusts (REITs), worried rising rates would cripple the businesses and hurt the bottom lines.

Lending Memo Dividends

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Yet recent research reveals over the last 33 years in the 135 months when the yield on U.S. Treasury Bills have risen, it turns out REITs have outperformed the market as a whole. In fact investment firm Cohen & Steers notes, "although rising interest rates can impact real estate values and the performance of REITs, higher interest rates do not necessarily lead to poor REIT performance." 

This will likely mean big things to the diversified and attractive operations of Realty Income (NYSE:O), Health Care REIT (NYSE:HCN) and Digital Realty Trust (NYSE:DLR), which all offer compelling reasons to consider an investment. Especially knowing part of the reason for historical outperformance was the reality rising rates often indicate an improving economy, which will ultimately cause more companies to expand and seek the property and assets provided by REITs. 

In video below, Fool contributor Patrick Morris speaks to why investors should always keep that in mind when considering an investment in a REIT, but it also shouldn't be used broadly to jump into any and every REIT out there. 

Nine more great dividend titans
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks -- like REITs and the three mentioned above --as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio, and Warren Buffett also loves one. To learn the identity of these stocks instantly and for free, all you have to do is click here now.


Patrick Morris has no position in any stocks mentioned. The Motley Fool recommends Health Care REIT. 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.

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