It seems like only yesterday that real estate investment trusts (REITs) were viewed as the next shoe to drop during the global credit crisis. Back then, plenty of REITs cut or suspended dividends while a couple even filed for bankruptcy. Those days are long gone as one of favored asset classes among income investor have come roaring back over the past couple of years.

As a group, REITs rallied so hard and so fast in 2010, that many analysts and so-called experts were left saying the asset class was overvalued. That may have been the case and there probably are more than a few REITs that are overvalued today, but the assertion that REITs are too pricey glosses over a crucial fact: They are high-yielding instruments and in a yield-starved environment, investors may be willing to ignore valuations in an effort to generate income.

Along those lines, it's not surprising that a plethora of REITs are outpacing the S&P 500 by handsome margins this year. Let's have a look at a few here.

Pennsylvania Real Estate Trust (NYSE: PEI):

Pennsylvania Real Estate Trust manages, develops, acquires, and leases mall and power and strip centers in the Eastern U.S. With a yield of 4.1%, the company expects funds from operations of $1.83 to $1.90 per share this year, inline with mean estimate of $1.90 per share. The FFO number is important because Pennsylvania Real Estate Trust's current payout is less than a third of what was before the financial crisis. The 40.5% year-to-date returns could grow with an increased dividend.

Macerich (NYSE: MAC):

California-based Macerich is a shopping center REIT and that gives the company exposure to the health of the U.S. consumer. In fact, the shares have proven to be a useful way of gauging how the consumer is feeling. For a REIT, Macerich's 3.7% yield is pretty ho-hum and yes, Macerich cut its dividend during the financial crisis. That said, the distribution rose by 10% last year and the REIT has offered year-to-date returns that are better than double those offered by the S&P 500's.

American Capital Mortgage Investment (NASDAQ: MTGE):

American Capital Mortgage Investment is a mortgage REIT that was started by some executives that used to be part of American Capital Agency (NASDAQ: AGNC). With a market-cap of less than $225 million, American Capital Mortgage is a micro-cap stock, but nothing else about this stock is "micro." Certainly, not the 21.6% year-to-date return, nor the whopping 16.4% yield.

Dynex Capital (NYSE: DX):

Dynex Capital is another mortgage REIT and it's fair to say to its 5.2% year-to-date return isn't too impressive. Over the past five years, Dynex shares have outperformed the S&P 500 index by about 100% on a normalized basis and the dividend has risen by more than 50% since 2009, according to Brad Prigmore. The current yield is 12%.

Related Articles
  1. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  2. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  3. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  4. Stock Analysis

    2 Oil Stocks to Buy Right Now (PSX,TSO)

    Can these two oil stocks buck the trend?
  5. Investing News

    What Alcoa’s (AA) Breakup Means for Investors

    Alcoa plans to split into two companies. Is this a bullish catalyst for investors?
  6. Insurance

    The 5 Biggest Russian Insurance Companies

    Discover the five companies that dominate the Russian insurance market, and learn a little more about their business operations and ownership.
  7. Stock Analysis

    Top 3 Stocks for the Coming Holiday Season

    If you want to buck the bear market trend by going long on consumer stocks, these three might be your best bets.
  8. Investing News

    Could a Rate Hike Send Stocks Higher?

    A rate hike would certainly alter the investment scene, but would it be for the better or worse?
  9. Insurance

    Biggest Life Insurance Companies in the US

    Read about the top life insurance companies in the United States as measured by written premiums and learn a little more about their business operations.
  10. Investing News

    Corporate Bonds or Stocks: Which is Better Now?

    With market volatility high, you may think it is time to run for corporate bonds instead of stocks. Before you do take a deeper look into which is better.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!