Finding quality companies with dividend yields around 10% used to seem like a pipe dream not that long ago. Today, there is a long list of investable, quality, high-yielding equities. This makes picking the winners of the bunch the real goal.
In this article, I’m going to discuss one company with a dividend yield around 10% at the time of writing. I believe this dividend is likely to continue its payout. Therefore, I see this company as a great long-term buying opportunity for aggressive investors today.
Many investors are now deciding to put their heads in the sand when it comes to any real estate-oriented businesses out there. In many cases, this is for good reason. The likelihood of renters or leasers of property not making their payments has just skyrocketed. Real questions abound as to who is going to be left holding the bag.
Avoid office/retail real estate
Investors need to consider one important factor when it comes to real estate. What’s important here is the type of real estate. I believe some property types will be absolutely decimated for the next 10 years. Others may make it through relatively unscathed. Office and retail are two property types that would fall in the former category.
This COVID-19 outbreak has sped up transitions that were already underway. These include the long-term secular trends of work-from-home policies and e-commerce. Having office space or a retail storefront is nice. However, it’s simply not necessary in the new economy. Therefore, real estate companies investing billions in building new office buildings or strip malls are certainly in danger right now. There are a number of empty offices and corner stores that aren’t occupying their properties. They likely won’t be willing or able to pay their obligations to REITs or property holding companies.
Choose commercial, industrial, or residential real estate
That said, commercial, industrial, or residential real estate should outperform coming out of this virus. These property types have a lower likelihood of nonpayment than office or retail properties. Individuals and businesses occupying these properties are more likely to prioritize lease payments. Nobody wants to live on the streets or lose their factory space. However, a retail space can relocate or go online.
In addition, commercial, industrial, and residential real estate are still needed in the new economy, which we are still transitioning toward.
Brookfield Property Partners
Looking for a specific investment recommendation? Brookfield Property Partners (TSX:BPY.UN)(NASDAQ:BPY) is a great choice for investors seeking real estate exposure. The company’s portfolio is focused mainly on multifamily residential real estate. Brookfield’s portfolio also has some commercial real estate as well as small amounts of high-quality retail and office space.
Quality really matters. It’s clear to me that Brookfield’s portfolio of properties is among the highest quality of diversified real estate investment options on the TSX. Brookfield has definitely earned my stamp of approval.
Finding companies like Brookfield Property Partners that offers a +10% yield and potential growth via acquisition opportunities in this current market is hard to do. This company’s traditional yield has been in the 7-8% range. Therefore, this broad selloff in financial markets seems to be providing a nice entry point for investors looking for a little extra yield on otherwise high-quality assets.
Stay Foolish, my friends.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Property Partners LP.