The correct answer is     (A.) REITs

Real estate investment trusts (REITs) are on a roll. Shares of these commercial property owners have more than doubled since hitting bottom this March, as measured by the benchmark MSCI U.S. REIT Index. In contrast, the broader S&P 500 index has advanced only about +62% off its March nadir.

The sector is a gold mine for income investors. Despite their stupendous rally, more than six dozen REITs still offer yields above 6%. So should you rush out and capture the highest yields? Definitely not!

Yield isn't everything and price momentum can be deceptive as well. The REIT out-performance should be seen in context. Between the February 2007 peak and this March, the REIT index declined roughly -78%. In contrast, the S&P fell in March only -57% from its October 2007 peak. No property sector escaped unscathed. Every sector (with the exception of self-storage) delivered double-digit losses in 2008, and that dismal performance continued through March 2009.

In the aftermath of the Great Recession, many REITs are still weighed down by overleveraged balance sheets and weak earnings prospects. The near-term outlook is uncertain. REITS have responded to this cash crunch by slashing dividends (technically, distributions) or by cutting the cash portion of the payouts and offering holders a portion of stock instead. Another cash-saving strategy was to reduce the cash portion of dividends and instead offer part-cash and part-shares.

Although the recovery in REIT shares is in part based on the overall market rally, it's also underpinned by government programs. The Small Business Administration's 504 loan program is helping put a floor under commercial real estate by providing loans to small businesses so they can buy property for their operations. The capital markets are also opening again, and REITs have raised some $20 billion since the beginning of 2009 through both debt and equity offerings

But if you wait for a "meaningful recovery" in mid-2010 or later, you'll miss out on the opportunities that are presenting themselves right now. Income investors who want to capture the strongest REITs with rock solid yields before the recovery moves into full swing need to read the latest issue of StreetAuthority's High-Yield Investing newsletter. Editor Carla Pasternak scoped out REITs with current yields of 6% or more, then studied each one to find the best bets for the coming recovery. What she found will surprise you. To read the names of Carla's picks, and to learn more about, please visit this link.