Most popular REITs

Top REIT Performers For 2016

In simplest terms, the price of the stock is driven by the yield and a security is most attractive when it provides the highest overall yield.

Conversely, the price of a stock eventually reaches a place were the yield is no longer attractive and buying halts, that becomes the tipping point and the stock price starts to drop.

But the real attraction to a company’s dividend isn’t just its current yield, but its dividend record. The current yield tells us practically nothing about profitability, instead, the most important measure of value and predictability of future profits may be the company’s overall dividend performance.

It stands to reason that whenever a dividend is increased, the underlying stock price will rise in order to reflect the increase in value. On the other hand, whenever a dividend is reduced, the stock price will certainly decline within value.

Because Real Estate Investment Trusts (or REITs) must payout at least 90% of taxable income as dividends, the stocks are arguably more predictable in terms of the dividend performance attributes.

You see, most REITs own commercial real estate that generate consistent rental income from a number of lease contracts. So the cash flow generated by the REITs give a high level of transparency and predictability as it relates in order to future dividend increases.

REITs Keep On Rising And Rising: Inside 3 Most widely used ETFs

Real estate investment trusts are proving worthy of a few serious Tubmans, as President Obama recently put it.

Several REIT ETFs bolted to new highs about the stock market today, making last week’s run-up seem like the prelude to bigger moves.

The asset class is proving to become a foundational piece for investors’ portfolios in an unsettled stock marketplace. It offers both attractive yields and solid fundamentals.

An allocation to property can substantially improve risk-adjusted returns, experts say. REITs tend to possess lower beta — a measure of volatility — than the broad stock exchange. Plus, their tasty dividends boost total returns when capital growth in stocks is tricky to find.

Income-yielding utilities and real estate ETFs have drawn roughly $7 million in fresh assets in 2016 through May 6, according in order to Mizuho Securities. Technology and health care exchange traded funds, respectively, noticed $10 billion and $5. 9 billion in net outflow within the same period.

Here is a look at three REIT ETFs showing leadership when it comes to both price performance and inflow of new money:

• Vanguard REIT (VNQ) isn’t any. 10 among U. S. exchange traded funds in terms of net inflow year up to now. It’s the only equity sector ETF in this list.
  VNQ retains $31. 91 billion in assets, has a 0. 12% cost ratio and yields 4. 32%. It’s one of the earliest and cheapest options in its segment.

The fund holds a hundred and fifty mostly equity REITs, including Simon Property Group (SPG) as well as Public Storage (PSA).

California-based Public Storage, an IBD 50 share, has a 97 Composite Rating out of a best-possible 99. It has grown revenue 9% a year in the last three years. Its dividend has grown at a 15% annual pace in the last three to five years.

VNQ tracks the MSCI U. Utes. REIT Index, which requires holdings meet certain liquidity and dimension requirements. Companies are weighted by their free-float-adjusted market cap. This shuts out mortgage REITs and specialty REITs, such as wood and prisons, according to investment research firm Morningstar. The catalog rebalances quarterly.

Investors are liking REITs more and more since the odds of a near-term rate hike grow less and much less. Higher bond yields can dent the appeal of utilities and REITs’ dividends in comparison.

VNQ has absorbed $2. 26 billion in investor money whilst surging 8. 6% so far in 2016.

• SPDR Dow Jones REIT (RWR) spends in 96 equity REITs. It tracks the Dow Jones Ough. S. Select REIT Index, a cap-weighted benchmark that requires holdings to possess a minimum market cap of $200 million.

It has less contact with small-cap and midcap stocks than does VNQ. However, the 2 funds have significant holdings overlap.

RWR also excludes specialty as well as mortgage REITs.

The returns on REITs come from a mixture of rental income and property appreciation, says Morningstar analyst Robert Goldsborough.

“Many of those firms use leverage, which can magnify the gains and losses from fluctuations within the value of their properties, ” he said. REITs are the capital-intensive business. The use of debt to finance operations and acquisitions also makes them sensitive to rates of interest.

RWR has $3. 66 billion in assets, a 0. 25% expense ratio along with a 3. 73% yield.

The ETF absorbed $214. 5 million in net inflow within the first four months of 2016. It has gained 6. 7% year up to now.

• Schwab U. S. REIT (SCHH) follows the exact same index as RWR.
  “As most REIT ETFs use similar strategy and perform almost identically, price is an important factor whenever choosing an ETF, ” writes Goldsborough.

SCHH holds $2. twenty three billion in assets and yields 2. 45%. Its 0. 07% expense ratio may be the lowest in this segment.

Its low-cost edge has helped SCHH outperform peers that track exactly the same index by roughly the difference in their expense ratios, Goldsborough stated.

RWR soaked $122. 7 million in net inflow in 2016 via April’s end. It has risen 6. 8% so far within 2016.