Insiders Are Buying These 2 Attractive Yield Plays

High yield sectors such as Consumer Staples and Real Estate Investment Trusts (REITs) have underperformed the overall market since the 10 Year Treasury yield put in a recent bottom of ~1.6% in May just before the Federal Reserve starting to discuss tapering.

Although I do believe the Federal Reserve will eventually start its long discussed "taper" sometime in the first half of 2014, I think a good portion of any rise in interest rates due to this has already been anticipated by the market.

I also believe that the better economic growth most forecasters anticipate for 2014 will turn out to be a "mirage" just like the better GDP & Job growth ahead investors were told to anticipate in 2010, 2011, 2012 and 2013. When the Federal Reserve does taper it will remove a major support for the market and I doubt economic growth will make up for losing that pillar of support.

The global economy and our current fiscal policies just are not supportive of sustained GDP growth much above 2% annually in my opinion. This has been the story of the worst post war recovery on record based on job & economic growth. I believe this trend will stay in place for 2014.

Therefore I will continue to add to my income portfolio as I believe some of the recent underperformance is unwarranted. I also think dividends will be a big part of returns in what I envision as a tepid stock market as the Fed withdraws support in 2014.

Here are two attractive high yielding REITs that will remain a core part of that income portfolio. Both have seen increasing insider purchases in recent months as the sector has underperformed the market.

Healthcare Trust of America (HTA) is a real estate investment trust that focuses on medical office buildings and healthcare-related facilities. It has a well-diversified collection of healthcare properties in 27 states with just under 13mm square feet of leasable space.

I continue to believe the company will benefit from the implementation of the Affordable Care Act, despite its disastrous roll-out so far. Love it or hate it, "Obamacare" will drive demand for more of the medical personal that Healthcare Trust provides accommodations for as more individuals are provided with insurance coverage.

This REIT provides a juicy yield of 5.7%. Revenues & earnings should increase in the 5% to 8% range over the next few years and I expect dividend payment growth in line with this range as well. The company also has a strong balance sheet, solid occupancy levels and insiders have bought over 100,000 shares since August.

Whitestone REIT (WSR) is a fully integrated real estate company that owns, operates and redevelops Community Centered Properties, which are visibly located properties in established or developing culturally diverse neighborhoods. The REIT owns and manages about 50 Community Center Properties, including retail, office and office/flex space, with 4.5 million square feet of gross leasing area (GLA). Almost all of Whitestone's properties are located in fast-growing Texas and Arizona.

Whitestone has seen occupancy rates move up 5% to 87% as the economy continues to slowly recover from its financial crisis nadir. This trend should continue and each percentage point increase in occupancy adds $600K to $700K to annual AFFO (Adjusted Funds from Operations).

This REIT provides a monthly dividend payment that current generates an 8.5% yield on annual basis. Insiders made new purchases in May, August and November as well. The company has a solid balance sheet after doing a secondary offering in October.

The REIT is growing nicely by acquisition and revenues should be up better than 30% this fiscal year and analysts believe more than a 20% sales increase is in store in FY2014 as well. Analyst coverage is sparse on this REIT. The three analysts that do cover the stock have a $16 a share price target on WSR, ~20% above the current stock price.

Source: Insiders Are Buying These 2 Attractive Yield Plays

Disclosure: I am long HTA, WSR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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