The Motley Fool

Should you be buying REIT shares in December?

Real estate investment trusts (REITs) could be a great investment in December if you’re looking to boost portfolio income.

December can be an especially good time to buy ahead of the Christmas spending season in Aussie stores.

Retail REIT shares such as Scentre Group (ASX: SCG) and Stockland Corporation Ltd (ASX: SGP) are prime targets for the buy basket this month.

So, should you be boosting your ASX portfolio yield with REIT shares, or looking elsewhere for income and growth?

Why REITs could be a great buy in December

REITs are required to pay out a significant percentage of their profits to shareholders each year. That means that REITs will often have high dividend yields but low capital growth.

For example, the Scentre Group security price has edged just 3.13% higher since the start of 2019 but boasts an impressive 4.80% dividend yield.

Stockland has bucked the trend to rocket 46.09% higher and yet still pay an impressive 5.48% to security holders.

These retail REITs make their money from owning shopping centres and leasing them out to retail tenants. For instance, Scentre Group is the owner and operator of the Westfield shopping centre chain in Australia and New Zealand.

These retail exposures can have a number of pros and cons. If retail is going strong, rental income from tenants is generally stable and security holders receive a stable return.

On the other hand, a downturn in retail conditions can spell trouble for retail REITs. Tenants go out of business and the value of portfolio assets can drop significantly for these REITs.

That’s why Christmas can be a great time to buy in if you think conditions are right. A strong retail season with a big turnout from Aussie shoppers could mean these REITs are a strong buy in December.

What other options are there on the ASX?

If you’re looking to invest in retail but want more capital gains, Ltd (ASX: KGN) could be a good option.

Kogan enjoyed a strong Black Friday of sales and could outperfom the REITs in December if the sales continue.

These 3 stocks could be the next big movers in 2020

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.

*Returns as of 6/8/2020

Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ltd and Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Related Articles...

Latest posts by Ken Hall (see all)