If it is raining dividends, you can relax.

Is Real Estate a Good Investment During Periods of High Inflation?

Clearly, 2022 has been an eye-opening experience for many investors. The novices and the uninformed are justifiably nervous. One of the things I learned more than ten years ago is that dividend growth investing lets me ignore most of the fearful news and doomsday projections and pronouncements. For dividend investors, 2022 has been a very good year.

Source: Seeking Alpha

Annual Dividends 2009 – 2022e

Janus Henderson provides just one of many big picture views of dividend payouts. Dividend growth is a key factor in the way I look at investments.

Covid was a difficult season. However, I did not panic or exit the market. Dividends kept arriving.

Dividends or Not?

Hartford Funds also illustrates a concept that I believe is generally true if you buy good dividend growth stocks and ETFs. It is true that there is a lot of noise in these numbers. The key factor to grasp, however, is that much of the gain of the S&P 500 from 1960-2021 is the result of dividends paid to investors.

Did you know that a large portion of the growth of the S&P 500 is due to dividends and dividend reinvestment?

Growth Is Better Until It Isn’t

The list of companies that investors chase because the company will be ever growing and ever more profitable is endless. While I don’t exclude growth stocks from my investment choices, wise investors know that the growth can collapse. Remember Blackberry? How about Kodak? Blockbuster? Sears? Boston Store? Radio Shack? Do you remember Peloton? Be careful when chasing and choosing growth investments. In most cases, you are better buying a growth-focused ETF for mutual fund rather than trying to pick winners.

AAII Journal offers some sage reminders about “growth” investing.

But What About REIT Dividends?

I like REITs far more than most brokers would recommend. I asked one broker why there were no REITS on their monthly recommended buy list. The answer is that they are nervous about the reactions of their customers to market volatility. However, NAREIT suggests that REITs vastly outperform the overall market during times of rapid inflation.

REITs can be an excellent play during times of high inflation.

In addition, a REIT is not just a REIT. It is an investment in a business sector. There are REITs that focus on warehouses, medical facilities, apartment buildings, offices, retail, self-storage, infrastructure, and even timber. Net operating income is a big deal. Therefore, I look for REITs that have a history of growing income and at least some dividend growth.

There are “sectors” in the REIT sector. Be careful of office buildings and shopping malls!

My Early Mistakes

My early years of investing showed lackluster growth and lackluster dividends. These are not unrelated factors.

From around 1985 to 2008 I made a bunch of bad investment decisions. Most of them are due to picking the wrong growth stocks, keeping too much of the total investment dollars in “safe” bond mutual funds, and a lack of understanding of REITs, BDCs, and other great dividend investments. It really isn’t hard to be an investor if you buy good investments and then ignore the noise and volatility. Always remind yourself that volatility is not risk unless you buy poor investments like Peloton.

Investing Mistakes Are Learning Opportunities

Don’t blame your investment advisor or your broker. Before you hire either one, find out what they think about dividend growth investments. Find out what they think about bonds and “safe” investing. If you don’t know the basics, you may be seriously disappointed.  A wise man said, “When you blame others for your investing mistakes it proves you didn’t do enough of your own work. Own your mistakes so you learn from them.” Ian Cassel

Full Disclosure

Cindie and I own various REITs in our accounts. The following shows our current REIT holdings sorted by ticker symbol. Some of these pay a monthly dividend, but most pay quarterly. Notice that Fidelity’s Equity Summary Score doesn’t always agree with Seeking Alpha. I prefer the Seeking Alpha QUANT rating to find the best investments.

Our current REIT Holdings. Pay attention to the current Seeking Alpha QUANT Rating when you buy an investment.