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Portfolio > Alternative Investments > Private Equity

REITs Beat S&P for Dividend Yields

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While U.S. REITs couldn’t keep up with the S&P 500 in July and for the first seven months, some REIT sectors are keeping up and even topping the market benchmark, according to data released Wednesday. Plus, REITs are outperforming the S&P when it comes to dividend yields, the industry group NAREIT says.

On a total-return basis, the FTSE NAREIT All Equity REITs Index gained 0.8% last month, while the S&P 500 was up 5.1%. Year to date, the FTSE NAREIT All Equity REITs Index improved 6.7% vs. 19.6% for the S&P 500.

On a 12-month basis, the FTSE NAREIT All Equity REITs Index improved 8.9%, compared with 25% for the S&P 500.

In terms of dividend yields, the FTSE NAREIT All REITs Index yielded 4.3% as of July 31, and the FTSE NAREIT All Equity REITs Index was 3.5%. This performance tops that of the S&P 500, which had a dividend yield of 2.1%.

In addition, the FTSE NAREIT Mortgage REITs Index had a dividend yield of 12.6%, home-financing REITs yielded 14.4%, and commercial-financing REITs yielded 6.9%.

Sectors Soar

The latest NAREIT data show that all sectors of the U.S. REIT market produced gains for the first seven months of 2013, but the commercial-financing subsector of the mortgage-REITs group outpaced the market index: It produced gains of just over 24% and a dividend yield of 7%.

The lodging/resorts category had total returns of 16.7% for the first seven months of 2013 and a dividend yield of 7% as of July 31. This performance came close to matching that of the S&P 500 year to date.

Furthermore, manufactured-home REITs did well with 18% returns and 3.7% dividend yields.

Other Data

According the REIT-focused industry group, the overall equity market capitalization of 191 of its FTSE NAREIT All REITs Index members is $676 billion, with the components of the FTSE NAREIT All Equity REITs group accounting for $605 billion.

REITs, listed and nonlisted, own about $1 trillion of commercial real estate assets as of July 31. They paid out some $29 billion in dividends in 2012; on average, 68% of annual dividends paid by REITs qualify as ordinary taxable income, 13% qualify as return of capital, and 19% as long-term capital gains.

Forty-six equity REITs are rated investment grade, and REITs have raised more than $49 billion in initial, debt and equity capital offerings so far in 2013.

Check out Homebuilding Sector: Time to Buy or Sell? by Ron DeLegge on ThinkAdvisor.


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