It would be up to me to ascertain whether any ideas are suspect or not... I am pretty confident there are other guys here in my position... any constructive ideas from people who dealt with a similar situation to mine are welcome... your thoughts on hiring a CFA are appreciated...
I have been accumulating some great material on this subject lately and I will post names authors etc. at a later point (all my stuff is at my trading desk, I'm at home now and don't want to misspell or mistake titles). A key point it seems is the safety of the dividend. Its great to have a 7%, or even double digit dividend, but if the stock is about to have a dividend cut watch out. It seems that the AFFO/dividend or "adjusted funds from operations" per share divided by the dividend per share is a key metric. AFFO is basically a form of "cash flow" further adjusted for normalized ongoing capital expenditures. So its viewed as a proxy for cash flow (big controversy on this, too little time to delve into now). Many REITs, especially those where revenues are generated from long term leases, give an illusion of cash flow stability. Office REITs are a good case in point. Building owners wrote leases often for 10+ years at the prevailing rental rates of the mid 90's. Well, those leases are expiring now or in the near term future and will need to be re-leased at current (lower) market rates, so there is a sort of "cliff" effect on cash flow. Equity Office Properties is the grand-daddy in this genre and is run by highly respected management. However, their dividend looks a bit suspect, as does many other office REITs. I advise those interested to look into: www.investinreits.com and www.nareit.com Also do a search of recent Wall Street Journal archives in the commercial real estate and REIT sections. They have been pounding the table on this point. My strategy, which is a work in progress, is to find a portfolio of stocks with relatively highly dividend yielders with good AFFO/dividend yield coverage to go long, and short lower dividend yielders that have weak AFFO/div yield coverage. I'm early into this project. Will share thoughts with reciprocally-minded others.
How about selling naked puts regularly to generate income and build a portfolio or reits? (that is, once you resolve which ones to buy...)