Searching for a scorching income hotspot? Look north of the border
to one of the highest-yielding -- but most unheralded -- income
sources in the world. With just 3 dozen securities in this asset
class, most investors have missed out, but I think that may change.
(Full Story Below)
Also in Today's
Issue...
Russian Nuclear Crisis
to Hit the U.S. in 2013
Few investors realize
that a 20-year energy agreement between the United
States and Russia is about to expire. This deal supplies
10% of America's electricity. As broke as our government
is, the situation is so serious that President Obama is
asking for $36 billion to avert this crisis. And
Republicans support him.
Buy
This "Rockefeller" Investment and Hold it Forever
This security is named
after the richest man in modern history -- John D.
Rockefeller. My "Rockefeller" investment allows you to
own the broadest group of monopolistic holdings I can
think of and it pays a healthy dividend to boot.
Canada has been an income investor's
playscape for decades.
That reputation comes thanks mainly to Canadian trusts,
which aren't taxed at the corporate level as long as they
pay out the bulk of earnings as dividends. That's allowed
them to spit out double-digit yields like clockwork. So many
businesses opted for the trust structure that lawmakers
decided to start taxing them like corporations in 2011. [Read:
Don't Buy a Canadian Trust Until You Read This]
Does that mean high yields from Canada are history?
Hardly! There's another group of Canadian securities
shooting off tax-advantaged high yields; I've found some as
high 11.5%. Best of all, conditions for this group look to
be on an uptrend.
Canada was one of the first countries to recover from the
global recession. GDP grew +6.1% in the first quarter...
nearly all jobs lost during the recession have been
recovered... and Canada has even had to start raising
interest rates thanks to its recovery.
These are good signs for investors in Canadian REITs.
Yes, just like the U.S., Canada has REITs too. But I doubt
you've heard of them before. Canada has about three dozen
REITs in total. Yields average about 8%, but I've seen them
creep upwards of 10% -- even nearly 12% in some cases.
That's what you get when business is booming.
Unlike U.S. real estate, Canada's property market is
thriving. Occupancies average 97.4%, according to a June
report by credit rating agency DBRS. Moreover, Canadian
REITs are taking full advantage of low interest rates (even
though they are now rising slightly) to refinance existing
debt at historically low rates. For example, Riocan (TSX:
REI-UN), Canada's largest REIT, recently reduced a
mortgage on one of its properties by about -1.8% when it
secured a five-year mortgage at 4.2%, a record low for the
trust. Management estimates the savings from refinancing its
debt this year should equate to about $0.02 per share.
These factors have helped Canada's largest REITs return
nearly +18% so far this year, according to the S&P/TSX
Capped REIT Index. In contrast, the S&P 500 is up only +5%.
But most of us aren't investing in Canada's REITs. Why
aren't we flooding the sector with cash?
The answer is twofold. First is the market's sheer size.
Canada's property market is very small compared to the U.S.
I told you above that only about three dozen are traded.
But I think the biggest reason is that Canadian REITs trade
mostly on the Toronto Stock Exchange (TSX)... and that
scares off stateside investors. Here's the good news: It
doesn't matter.
Most U.S. brokers can fill orders on the TSX. Fidelity,
E*Trade, and Schwab all offer access. Buying Canadian shares
can actually be as simple as buying those in the U.S. At
worst, it might take an extra phone call to your broker.
One thing you do have to watch -- currency rates. Canadian
REITs trade and pay dividends in Canadian dollars. But
remember that those amounts will be converted back to U.S.
dollars if you're an American investor. This feature has
actually been good news since about the start of 2009; the
Canadian dollar has gained about +15% over that time. An
appreciating Canadian dollar makes dividends and share
prices worth more to U.S. investors, making Canadian REITs a
solid way to play a weak U.S. dollar, too.
Good Investing!
Carla Pasternak's Dividend Opportunities
P.S. -- I mentioned above that
Canadian REITs yield up to 11.5%. That comes courtesy of
Scott's (TSX: SRQ.UN). As my
High-Yield International readers know, this REIT
isn't my favorite, but it certainly pays a mouth-watering
monthly yield.
Our research staff is putting the finishing touches on a new
investing course: Guide to the World's Greatest Yields...
Plus 6 Ideas to Get Your Started
Read this course, and you'll
learn:
3 of the most exciting foreign markets for capturing high yields
and growth
How you can access foreign yields... without changing brokers or leaving the U.S. markets.
The 11 countries with 0% withholding for Americans.
-- Research Staff
10 Stocks to Beat the
Market in 2012
Stock #1 has raised its dividends 110% over the past
5 years... Stock #2 has stakes in 160 oil wells and
is on track to pay dividends of 10% (or more) in
2012... Stock #3 has seen earnings rise 67%
year-over-year... And these are just 3 of our 10 top
picks for 2012.
Thanks
to the financial reform recently passed by Washington, there are big
changes coming to an income hotspot. The best news: investors buying
the securities I mention below could see handsome yields and capital
gains.
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