What's the catch with Real Estate REIT units?
It seems like very good holding if they can continue to give that type of (6-8%) dividend, while holding their original value.
What's the catch or downside in holding these?
Dec 19th, 2016 3:49 pm
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How do you quickly tell (if they pay dividends or distribution)?
Dec 20th, 2016 6:38 pm
Usually those with the UN ticker symbol have distributions rather than dividends, as they are not taxed at the source and are taxed in the hands of the Unit (UN) holder.
Dec 20th, 2016 9:03 pm
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Using a hypothetical example, would you invest in a house that went down in value from 100k to 10k over 10 years and paid you 90k in rent? What did you really gain from such an investment?abc123yyz wrote: ↑Dec 20th, 2016 5:40 pmIt all depends on if you care about the share price or your goal is to live off dividend income. Share prices can signficantly change, REIT's tend to do poorly in a rising interest rate environment. However there earnings don't heavily change if they are invested in shopping centers etc. Take Riocan (REI-UN.to), I just took a look at their chart going back to 2011. In 2011 the share price was $26.43 and their dividend was 11.50 cents (yield of 5.2%), today their share price is actually lower at $26.16 and their dividend is 11.75 cents per month (yield 5.39%). So the share price hasn't gone anywhere, and their dividend has been pretty stable.
If you are planning on selling the shares to make money, they may not be a great investment. If you are planning on creating a dividend income portfolio they are decent (don't expect dividend increases, or significant growth in share price). ..
Dec 21st, 2016 3:34 pm
That's not a great example...more like investing in a house that went from 100k to 99k over 10 years and paid you $50k in that time. Sounds like a decent investment to me.
Dec 21st, 2016 3:39 pm
Well, it can be more like investing in a house that went from 100k to 99k over 10 years and paid you $6-8k per year (or $60k-80k) in that time.
Dec 21st, 2016 4:04 pm
If you do the math from your example, it's a terrible return! This is roughly a ~4.2% (100k compounded for 10 years @ 4.2% ends up @ 150,895) annual compounded return.
See above, your return isn't much better at around 4.8%, hardly worth getting out of bed for. 10 year GICs in 2011 were paying 4.25% risk-free.