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Strategies & Market Trends : Dividend investing for retirement

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To: Woody_Nickels who wrote (15898)	6/1/2013 1:17:28 AM
From: Elroy	1 Recommendation Read Replies (1) of 34328

Your hypothesis depends on the REIT earning more than the pf shares cost. Not always true. Yup, it's not always true, but it has been for the past few years. I wasn't paying attention to mREITs when they weren't earning more than pfd shares cost. When was that? Most of them have only been around for 2-5 years. NLY is I guess the oldie. More shares divided into constant income means less all around. The income isn't constant. If the mREIT raises money with preferred shares it has a larger capital base, and thus larger income. As long as the capital raised by the preferred issuance earns more than the preferred coupon, there will be MORE money for the common shares. If the preferred costs 8% per year, but the mREIT is able to earn 12% via leverage of it's capital base, the extra 4% goes to the common without any increase in the number of common shares.

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