Luxor Capital Up to 9.2% of American Realty Capital Properties Inc (ARCP)

Lexington Realty Trust (NYSE:LXP) reduced its dividends to less than 2 cents per share after paying over 30 cents per share for about 10 years; even after recent increases, quarterly payments are well below these levels at 15 cents per share. So while it has the highest yield of this peer group at 5%, income investors should be aware that the company is vulnerable to economic shocks. National Retail Properties, Inc. (NYSE:NNN) and Brandywine each post yields in the 4.3-4.4% range. The $2 billion market cap Brandywine follows the same pattern we’ve seen or companies which were around pre-crisis: quarterly dividend payments are roughly a third of what they were in late 2008, and so investors should weigh the high yield of the stock against the risk of any events which could lead to dividend cuts. Interestingly, National Retail Properties, Inc. (NYSE:NNN) has actually managed to increase its dividend payments over this time. The stock’s beta is 0.2, which suggests in quantitative terms that it has little exposure to the overall economy, but given the company’s business we are skeptical and would need to look into the stock further before recommending it as an income or defensive pick.

We think real investment trusts should only be used as high-yield stocks to supplement the returns on an income portfolio focused on more conventional companies, particularly given their general sensitivity to market conditions. National Retail Properties, Inc. (NYSE:NNN) does seem worthy of checking out, however, and while American Realty Capital Properties Inc (NASDAQ:ARCP) does have a short history of paying dividends the yield is high and so some investors may want to look into how it would fare in rough times.

Disclosure: I own no shares of any stocks mentioned in this article.