Could 11.5%-Yielding Global Net Lease Be in Trouble?
If you are like most dividend investors, an 11.5% yield is like a flame to a moth -- you can't help but look, mouth watering, and glide on over for a closer examination. But yields that high, when S&P 500 Index ETFs are only offering yields of around 1.5%, need to be treated with extreme caution. Here's why Global Net Lease (NYSE: GNL) and its huge 11.5% dividend yield may not be as safe as investors would like.
Global Net Lease doesn't do anything particularly outlandish property-wise. For starters, it is a net lease REIT (real estate investment trust), which means it owns single-tenant assets for which the lessee is responsible for most of the costs of the property they occupy. Any single investment comes at a high risk because there's only one tenant, but across a large enough portfolio (Global Net Lease owns over 300 properties), the risk is pretty low. This is the same investment tactic used by dividend stalwarts like Realty Income and W.P. Carey, both of which have increased their dividends annually for decades.
Global Net Lease, as its name implies, also has a particular focus on geographic diversification. Roughly 60% of its rents come from North America, with the rest derived from Europe. W.P. Carey takes a similar approach, and Realty Income is increasingly putting money to work across the pond. So, again, nothing out of the ordinary, highlighting the fact that diversification is good for your portfolio and good for REIT portfolios.
Source Fool.com
