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iStar Financial Inc. (SFI), American Capital Agency Corp. (AGNC): How to Play the Real Estate Resurgence

The company looks to be a considerable value, with a book value of over $31 per share and an affordable price/earnings multiple of just under 8. The delicious extra is its $5 annual dividend – giving it a yield just north of 15%.

Toll Brothers Inc (NYSE:TOL), known for its focus on luxury homes, shows plenty of potential upside as its current P/E ratio is pushing 12, still below that of the Standard & Poor’s 500, and return on equity is a respectable 17%. If its gamble on condos pays off, betting that baby boomers will want to downsize to more convenient living, not necessarily less-expensive, then you may see this stock push to new heights. Over the past five years, its stock has advanced twice as much as the S&P 500.

Toll may also be a future dividend-paying stock. Although the company does not currently pay one, shareholders may eventually ask for a piece of the builder’s copious $7 per share in cash.

Simon Property Group, Inc (NYSE:SPG) has come back into the spotlight gradually buying and fixing up stagnant malls – mainly from distressed companies after the real estate bubble burst. In 2010, Simon offered to purchase money-losing General Growth Properties Inc (NYSE:GGP) for $10 billion – a deal supported by many General Growth Properties Inc (NYSE:GGP) investors – but the plan ultimately fizzled. Although falling short of the deal, Simon still shows a solid 29% ROE and pays an annual dividend of 2.9%.

SPG has a P/E ratio that is a bit high, at over 33. But it may be worth the premium as it looks to acquire more properties and generate revenues from leases as the economy improves. Investors looking for income may consider Simon’s preferred stock (SPGPRJ), which pays a tidy 5.9% annually.

Will real estate and REITs always go up? We know the answer is no. But until we can find a way to create new land, space will continue to become more and more limited as time goes on – and land and real estate more valuable.

The article How to Play the Real Estate Resurgence originally appeared on and is written by Sterling Raskie.

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