Retirement Expert Eyes REITs and Preferreds

09/03/2019 5:00 am EST

Focus: FUNDS

Robert Carlson

Editor, Retirement Watch

This is an ideal economic environment for both real estate investment trusts (REITs) and preferreds, explains fund expert Bob Carlson, editor of Retirement Watch.

Our retirement portfolio owns preferred securities through Cohen & Steers Limited Duration Preferred and Income (LDP). I like preferred securities in this economic environment.

They do well when the economy is growing modestly and interest rates are stable or declining. We purchased the fund in 2018 after it had declined for a while because interest rates were rising.

The fund uses about 30% leverage and recently sold at a 2.01% discount to net asset value, compared to a six month average discount of 2.88%. The fund returned 1.10% in the last four weeks and 20.78% for the year to date. The yield is 7.44%.

Our portfolio also owns a combination of preferred securities and REITs in the closed-end fund Cohen & Steers Real Estate & Preferred Income (RNP).

About half the fund is in real estate investment trusts and the other half is in preferreds similar to those owned by Cohen & Steers’ dedicated preferred securities funds.

The fund is up 31.65% for the year to date. It uses about 23% leverage. The recent distribution yield on the fund was 6.63%. It sells at a 6.85% discount to net asset value, compared to 8.76% six-month average discount.

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