David Fick, CPA
With two years of financial upheaval, investors are now dusting off and trying to figure out what to do with remaining assets. We believe this is good for REITs, which have an answer.
REITs were up 28.6% in ’09 vs. down 38% in ’08, down 16.8% in ’07, up 35.9% in ’06, and up 0.2% over five years. REITs were comparable to the overall market gains for 2009: S&P 500 was up 23.5%, Dow Jones Industrials up 18.8% and NASDAQ up 43.9%.
Stock picking beat sector allocation: Every sector had outperformers. Eight REITs had total returns above 100%; 57 REITs gained more than 20%.
Our 2010 REIT sector predictions: Debt markets will continue to show the way — with reasonable credit for reasonable borrowers on reasonable terms.
Total sector return: 10% up to June 30; 5% for the year (essentially dividend only), with the RMS Index at 817 (vs. 12/31/09 of 778).
Stock picking will beat sector allocation. Stocks with increasing dividends will outperform. There should be many more dividend increases than cuts for equity REITs.
Todd Thomas, CFA
KeyBanc Capital Markets
We reiterate our Hold rating, though we remain positively biased toward shares of Cedar Shopping Centers following our investor meetings.
The RioCan alliance continues to slowly attract the interest it deserves.
Demand for traditional grocery anchored shopping centers is strong. The asset type that CDR owns and is attempting to acquire in the RioCan joint venture is growing in popularity given its defensive attributes and predictable cash flows.