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I will say it until I'm blue in the face… stocks that pay large dividends while offering explosive growth will be the biggest winners in 2020.
Historically, the best place to find that combination of high yield and growth has been real estate investment trusts (REITs).
Of course, the market figured that out and bid up prices of REITs significantly in 2019.
Those bid-up prices change the valuation dynamic as well as the risk profile. Many of the most popular REITs are extremely overvalued right now.
Sure, it makes sense to buy anything with a yield significantly above the abysmally low rates in the market today. But not at any price.
If earnings fail to keep up the pace, the stock will eventually run out of steam.
Because of the impressive gains over the last two years, it will be a much more difficult year for those investing in REITs.
Growth prospects for some REITs remain attractive, but the price being paid is simply too high.
We have to dig deeper to find a fairly valued REIT in 2020.
I don't want to own a stock paying the highest premium.
To get a discount, we need to find a high-yielding REIT that hasn't seen its share price soar like many others. Numerous REITs have jumped 50% or more in the last 12 to 24 months.
So we need to pinpoint those stocks that have been overlooked.
Was there some sort of misstep that resulted in shares going lower or stalling in a raging bull market? Or is there some underlying flaw that will likely continue into the near future?
I don't want to own that kind of stock either.
But if I can find a reasonable explanation for weakness today, I may be interested in that stock, and so should you.
That's where today's REIT comes in. This company was crushed after one earnings miss last year. But that's created an excellent opportunity for those who buy today.