"This credit crunch is worse than a divorce. I've lost half my net worth and I still have a wife." -- Anonymous

It has certainly been quite a rough ride for most of the yield-hungry Fools out there. With major cuts coming from major entities like Citigroup (NYSE:C) and First Horizon (NYSE:FHN), every day seems to bring another announcement of the next impending dividend blowup. Furthermore, once-reliable income-focused strategies like buying a diversified basket of various real estate investment trusts -- REITs -- are quickly becoming one of the largest money losers of the current bear market.

As the old saying goes, if something looks too good to be true, it usually is. Many income investors still seem to believe that just because a company has a double-digit-plus yield it must also be a good investment. If that was the case, General Growth Properties would certainly make the cut. The company is still showing up on many screeners as having a whopping 290% trailing dividend yield, but obviously given its recent well-publicized problems and now-official "penny stock" status, this number is nothing but a mirage.

The most interesting observation for information-hungry Fools is that while many Wall Street analysts have been quite bullish on REIT companies like General Growth until very recently, CAPS users have awarded it the lowest one-star rating all the way back in January. What's more, most of the real-estate-related companies in the CAPS universe have been awarded a junk "one star" status despite their super-high dividend yields.

Does it mean there are no good REIT investments out there? Not necessarily. I used our CAPS screening tool to find real estate-related companies that have:

  • Market caps of $150M to $10B.
  • At least a 5% dividend yield.
  • Four- or five-star CAPS ratings.

Since we began tracking the eerily prescient collective intelligence of our CAPS investment community in November 2006, four- and five-star companies have outperformed the market, with average annualized gains of 7% and 12%, respectively.


Market Capitalization


Star Rating

Health Care REIT (NYSE:HCN)

$3.7 billion



Medical Properties Trust (NYSE:MPW)

$370 million



National Health Investors (NYSE:NHI)

$665 million



Omega Health care Investors (NYSE:OHI)

$975 million



Senior Housing Properties (NYSE:SNH)

$1.6 billion



Universal Health Realty

$341 million



Winthrop Realty

$180 million



* Data from Motley Fool CAPS and Yahoo! Finance as of 11/18/2008.

Not surprisingly, most of the names awarded such a high honor represent the more-or-less recession-resistant health-care sector. Does it mean they couldn't possibly cut their dividends or decline in value? Most certainly not -- in fact it's safe to assume many of them may have to due to the current credit crisis. But history suggests that companies with CAPS ratings of 4 or 5 stars have a good chance of surviving.

Of course, this screen is only a starting point in the research process. Come and join us in Motley Fool CAPS to delve into these companies further. Let our 120,000-strong (and growing) CAPS community help you sift through the rubble in search of a few great dividend stocks.

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Vad Yazvinski, the "Skeptical Capitalist," owns preferred shares of Citigroup, but none of the other companies mentioned. Health Care REIT is a Motley Fool Income Investor recommendation. The Fool's disclosure policy is always on the menu.