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.
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, Kogan.com 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.
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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Kogan.com 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.
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