Bond-Proxy REITs
Another type of REIT that often appeals to some investors is one that I refer to as a bond proxy. It is perceived as having a relatively slow FFO and dividend growth rate, but, because of its moderate debt and stable properties, it has a reasonably secure dividend with a yield that is usually higher than that of most REITs. Adjectives like reliable and consistent describe these REITs, which do not have aggressive external growth strategies and often own properties with long-term leases. Those seeking bond proxies should look for conservative, capable, and dedicated management teams, moderate debt levels, and a substantial, well-covered dividend. Growth and capital appreciation, of course, are likely to remain modest. Bond-proxy ...
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