REITS for the 2012 Model Dividend Portfolio (GOV, SNH, DLR, RWR)

Investors are chasing up rent-based assets because they are searching for yield. Earning 2% per year by lending Uncle Sam money is not enticing, so investors are still on the prowl for dividends with more 3%, 4% and even higher in dividend yields. 24/7 Wall St. recently released its own 2012 Model Dividend Portfolio. We have Government Properties Income Trust (NYSE: GOV) and Senior Housing Properties Trust (NYSE: SNH) on the list this year. While we have been a long-time fan since far lower prices, we have at least temporarily removed Digital Realty Trust Inc. (NYSE: DLR) from the Model Dividend Portfolio.

We have evaluated the current prices to show the yields and true values here on each. If applicable, color and other price target data has been added on each.

Government Properties Income Trust (NYSE: GOV) is very interesting at only 1.2-times book value. You can make 2% lending to Uncle Sam for 10 years, or you can collect a 7.7% dividend yield here by acting as the government’s landlord. This REIT was oversold and its tenants are federal, state and local government entities. When we added it to the Model Dividend Portfolio, it was at $21.75 and now shares sit above $23.00. Thomson Reuters has a consensus price target of $24.17, but we value this one at $25.00 or even higher.

Senior Housing Properties Trust (NYSE: SNH) is acting as the landlord for senior communities, assisted living and nursing homes. It recently has had a capital raise to pay for acquisitions and it does deals where it can. It avoided the reimbursement woes and it generates a 7% dividend yield currently. Thomson Reuters has a consensus price target of $24.00.

Digital Realty Trust Inc. (NYSE: DLR), a long-time dividend favorite for technology and the IT, has been removed from the 2012 Model Dividend Portfolio. We consider this the “Landlord of Technology and the Cloud,” and we removed it formally at $4.50 on the list, but now shares are even higher at $66.25. Our maximum price threshold was $62.00 with what was a 4.3% yield. We would be interested again if it returns to the high $50s. Thomson Reuters has a consensus price target of $66.70.

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For those investors seeking a more diversified strategy in the world of REITs for above-market yield, there is the SPDR Dow Jones REIT (NYSE: RWR). If we add up the last four dividend payments for the $2.03 paid out as income, then the implied yield based on a $64.00 price, we get almost a 3.2% dividend yield. It still beats Treasury yields by far, but at $64.00 its 52-week trading range is $52.32 to $70.26.

Read Also: High Dividends (Distributions) Outlook for Top MLPs in 2012

JON C. OGG