For investors who seek income from fat dividends, real estate investment trusts (REITs) have long been an attractive option, offering easy ways to buy into portfolios of office, retail, industrial, lodging, and residential properties, among other things. But it's not always a good time to buy any particular REIT, and a Merrill Lynch analyst has recently been opining that now is a good time to avoid most REITs.
Steve Sakwa recently downgraded many REITs, upgrading his rating on only two -- Manufactured Home Communities
Second, there's valuation. Many REITs have seen their prices zoom up significantly in recent weeks and months. According to a CBS MarketWatch article, "... Relative to net asset value, REITs are now trading at 107% vs. the sector's long-term average of 102%."
These cautions and explanations make sense. But it's important to remember that though an industry or sector might be unattractive at some time, that doesn't mean that every single company in them is unattractive. The airline industry, for example, has long punished investors and is still chock-full of factors that make it hard for companies to turn a profit -- think price wars, fuel costs, logistical problems, empty seats, bad weather, high overhead costs, and more. But amid all that, some airlines, such as Southwest Airlines
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Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article.