411 On Real Estate Investment Trusts

Mike Norman
This week, FOX News business contributor Mike Norman answers YOUR money questions. Ask FNC's business team your questions by e-mailing yourquestions@foxnews.com and check back each week. Plus, tune in to "The Cost of Freedom," Saturday starting at 10am ET.

I'm think of buying some Pogo Producing Company (PPP). What do you think? — Ying (New York, NY)

Mike Norman: Ying, based on trailing earnings, this looks like a value stock. However, forward estimates are wildly optimistic in my opinion. With crude down 30 percent from its high and natural gas off 50-60 percent, I don't think there is any way this company will hit its projections. I think it could drop another 15-20 percent if petroleum prices stay where they are. That's when I would buy it.

I have my IRA in the Vanguard REIT Index fund. I understand that the REIT funds vs. the real estate housing market are two different things, but I'm confused about the difference in their ups and downs in the market. If the "housing market" is supposed to be on the decline, does that have any effect on the REIT funds? It seems that whenever the market closes "up," my REIT fund goes down, and vice versa. Could you help me distinguish the difference, and should I stay with the REIT fund? — Diane (Easton, PA )

Mike Norman: REITs allow you to participate in large-scale investment in income property, whereas the "housing market" refers mainly to the single-family or multi-unit property market dominated by individual homebuyers. REITs tend to follow the housing market, but with a time lag. For example, home price appreciation eventually leads to rising rates of return in the income property market and strong performance by REITs. When home prices head lower, REITs eventually follow. Housing market trends suggest REITs may soon peak.

What do you think in general about dividend paying stocks? — Bob (Bradenton, Florida)

Mike Norman: Bob, I'm all for dividend paying stocks, provided the companies that are paying the dividends are solid, financially secure enterprises. When they are also value stocks and pay dividends, that is the best of all worlds.

I bought Suez (SZE) in 2004 — now, it has doubled — should I hold on to it or take my profits? It's in my IRA account. Thank you in advance — Steven (Atlanta)

Mike Norman: Steven, You should take your 100% gain and bring the money back to the U.S. where there are better values to be had (especially in big cap technology). In addition, currency trends might cease to work in your favor going forward, and that's why I prefer being dollar-invested.

Mike Norman is a FOX News business contributor and the founder and publisher of the Economic Contrarian Update.