REIT’s – Searching For Yield and Gains.

The Nightly Business Report on PBS is doing a segment called, “Searching for Yield," to look at alternatives to low- paying savings accounts.

The short segments will air all week. Yesterday they looked at REITs, (real estate investment trusts). REITs have outperformed the market year to date. For example, the iShares Dow Jones US Real Estate (NYSE: IYR) is up 10.3%, year to date. Additionally, I’ll be writing about the Morningstar 5 star, REIT mutual fund, AIM Real Estate Fund (IARYX), this week. So search for the article here on Benzinga under IARYX.

They reported that if you are willing to take on more risk, one option is real estate investment trusts. Many of them are yielding 4 or 5 percent. Contrary to the public perception of real estate as a toxic asset, the commercial property, that REITs invest in are pretty stable, unlike residential housing.

Steven Brown, portfolio manager of the American Century Real Estate Fund, believes now is a good time to buy REITs.

“Construction activity in the United States has hit the wall. It's going to be low for the next couple of years. And as we move forward, we expect demand to be greater than supply for commercial real estate in the coming years of 2011, '12 and '13. So that sets up a very attractive fundamental outlook for commercial real estate, which is what REITs own.”

Anthony Paolone, Reit Analyst, J.P. Morgan:

“We think you buy apartment stocks over the course of this year, because as landlords regain pricing power, they'll be able to raise rents a little bit faster than some of the other property types. So you'll see some growth in earnings. And we think that will bode well for the stocks. But, in the meantime, you are going to get dividend yields on these stocks that are probably about 4 percent.”

Financial planner Eric Hu typically recommends putting 10 or 15 percent of an investment portfolio in REITs for diversification.

Eric Hu, Financial Planner, Gryphon Asset Managemet:

“A REIT can provide an alternative investment -- alternative to stocks and bonds -- something that doesn't necessarily trade up or down with the stock market or the bond market. REITs are not tied to interest rates. So, once again, it can form a bit of a portfolio hedge.”

Nightly Bus. Report’s takeaway is: “The biggest risk to REITs is another major downturn in the economy, which further decimates real estate prices. On the flip side, the economy could really take off, in which case REITs typically lag the overall stock market.”