Why I love REITs

A REIT (Real estate investment trust) is defined as a company that invests in real estate with the intention of reducing their net income tax liability. Therefore, by law they are required to distribute 90 percent of their income to shareholders. This occurs by way of dividends, usually cash but can also be stock.

I recently found a REIT called Resource Capital Corporation (RSO) at $7.65. For the past month it has been on a complete tear. At one point it hit a high of $10.54 (37 percent increase) but is currently at 8.92 (16 percent increase). The other thing I really like about this is that the dividend yield is close to 16 percent. Every quarter it pays out $0.41 per share.

On the negative side of the coin, REITs can also be very dangerous especially with the current state of the market. With housing foreclosures, many REITs are bound to fail.

Another good pick: RAS