How large is the REIT industry?

How large is the REIT industry?

REIT Business Financial Snapshot


Business Size

FTSE NAREIT All REITs equity market capitalization = $1. 052 trillion
FTSE NAREIT Just about all Equity REITs equity market capitalization = $989 brillion
221 REITs have been in the FTSE NAREIT All REITs Index
190 REITs trade about the New York Stock Exchange
NYSE listed REITs equity market capitalization = $972 million


Yield Comparison

FTSE NAREIT Just about all Equity REITs: 3. 70%
S&P 500: 2. 12%
Stock exchange-listed REITs paid approximately $46. 5 billion and public non-listed REITs paid away approximately $4. 5 billion in dividends during 2015.
On typical, 66 percent of the annual dividends paid by REITs be eligible as ordinary taxable income, 12 percent qualify as return associated with capital and 22 percent qualify as long-term capital gains.

Influence and Coverage Ratios

Collateral REITs

Debt Ratio: 31. 0%
Coverage Ratio: 5. 0x
Set Charge Ratio: 4. 6x
46 Equity REITs are rated expense grade, 68 percent by equity market capitalization.


Financial debt Ratio: 40. 6%
Coverage Ratio: 3. 8x
Fixed Charge Percentage: 3. 5x
46 REITs are rated investment grade, 62 % by equity market capitalization.
Coverage ratio equals EBITDA divided through interest expense.
Fixed charge ratio equals EBITDA divided by curiosity expense plus preferred dividends.

Average Daily Dollar Trading Volume

Sept 2016: $7. 6 billion
September 2011: $4. 8 billion
Sept 2006: $2. 3 billion
Data as of September 30 2016, other than where noted.All data are derived from, and apply and then, publicly traded US REITs.

REITs, boasting big out performance, have earned their own sector

Real estate investment trusts (REITs) happen to be lumped in with the financial sector, which hasn’t necessarily been the best thing, considering banks’ lower profits and tighter regulation since the monetary meltdown in 2008.

But that’s changing Thursday, when S&P Dow Jones Indices adds an 11th sector for that group, the first adjustment since 1999.

The change has been in the works for a while, with S&P Dow Jones Indices making the initial announcement within November 2014 that its global industry classification standard (GICS) would range from the new real estate sector. In March, David Blitzer, the managing director and chairman from the Index Committee at S&P Dow Jones Indices, said the change had been made to recognize “the growing importance of real estate within the world’s equity markets. ”

The new sector will include collateral REITs. Mortgage REITs will have their own subindustry group inside the financial sector.

An equity REIT is a company that owns property for development or long-term investment, and is required to shell out at least 90% of its taxable income through dividends in order to shareholders. A mortgage REIT originates real estate loans or spends in mortgage-backed securities.

There have traditionally been 10 sectors for that S&P 500 SPX, -0. 31% S&P 400 Mid Cap MIDDLE, -0. 09% and S&P Small Cap 600 SML, -0. 10% indices. The actual S&P 500 financial sector previously included 92 companies, with 25 banks creating 46% of the sector’s market capitalization. There are 27 REITs within the S&P 500, all of which are equity REITs.

Jefferies analysts Steven DeSanctis and Omotayo Okusanya in May predicted the REIT sector would outperform due to buying pressure on mutual fund managers who were “substantially underweight the actual sector. ”

However, Laszlo Birinyi, a prominent real estate buyer, said this week that the new REIT sector would assist the securities industry but confuse investors. Carving out a separate sector could also prompt some mutual funds or ETFs that focus on the financial sector to market some of their REITs, which could affect shareholders of the funds who are searching for income.

Still, investors may not be so easily confused. Equity REITs are nothing beats banks, and have many advantages in the post-crisis, hyper-regulated atmosphere.

Splitting the equity REITs from the financial sector and into their own sector “makes lots of sense, ” said Joel Marcus, founder and CEO of Alexandria Property Equities Inc. ARE, -0. 20%

In an interview Aug. twenty nine, Marcus emphasized the stability of REITs, as compared to the actual banking industry, which “doesn’t hold hard assets” the way collateral REITs do.

He also said the banking sector “is a far cry” from what it had been before the bankruptcy of Lehman Brothers in 2008, which helped result in much greater capital requirements, a tightening of credit standards along with a clampdown on certain types of commercial lending.

Alexandria Real Estate Equities was founded in 1994 and targets developing and owning major “urban campus” facilities for the life-sciences business. The company’s stock is included in the S&P Mid Cap 600 Index and it has a market value of $8. 6 billion. The shares possess a dividend yield of 2. 90%.

Marcus said the company is within a sweet spot, developing properties in “great locations” because from the ability of large R&D-oriented corporate tenants “to attract great expertise. ”

Michael Binger of Gradient Investments included Alexandria Real Estate Equities among several six of his favorite dividend stocks he shared during a good interview in May.

In recent years, REIT stock prices happen to be sensitive to any hint of interest-rate increases by the Government Reserve, and the prolonged low-rate environment has raised valuations, because yield-hungry investors have expanded their horizons. But Marcus pointed out how the ownership of real estate has traditionally positioned REITs has hedges in order to inflation.

Whether you agree that REITs should have their personal sector, it’s happening, and the group’s profile will be elevated. If you are seeking current income, you should consider REITs in your portfolio.

How REITs have performed
If you’re investing in the REIT for income, you’re obviously not going to reinvest the actual dividends. But to make fair comparisons, these total-return charts just about all assume reinvestment.

Highest-yielding S&P 500 REITs

The S&P 500 REIT sector has greatly outperformed the actual index, as well as the banking sector, over the past 3 years:
FFO stands for funds from operations, which is a non-GAAP measure utilized in the REIT industry to provide an estimate of cash flow readily available for dividend payouts. FFO adds depreciation and amortization to earnings, while subtracting gains in the sale of real estate. The FFO yield is each company’s previous 12 months’ FFO divided by its closing share price upon Aug. 30.

For Weyerhaeuser Co. WY, -1. 54% we have included the free income yield for the past 12 months, as calculated by FactSet, within the table, because the company does not report FFO. Free income is a company’s remaining cash flow after planned capital opportunities. This is money that is available to pay dividends, repurchase gives or for other corporate purposes.

A 12-month FFO yield (or free income yield) that is less than the current dividend yield doesn’t suggest a dividend cut is forthcoming. But if the trend continues to have an extended period, the chances of that happening rises.

If you’re interested in the stocks listed here, you should do your own research in to company strategy and performance, preferably with the assistance of your own broker or adviser. Then if you decide to invest, it’s best to have clear objectives and be ready for a long-term commitment to fulfill them.

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