Real estate investment trusts, or REITs, are generally considered income investments. Some investors panic and sell them when interest rates rise. But the recent Federal Reserve policy change should silence that fear.
In the meantime, you can see that REITs have done very well in the long-term market as a whole. Listed below are the S & P 500 REITs.
We pointed out in August that an instinctive reaction to avoid REITs when interest rates were rising is not supported by performance. A rising environment is generally characterized by significant economic growth, which means that rental income and profits of REITs will increase. This tends to offset the negative price effects of rising rates.
The Fed's recent change in direction may have eliminated the usual fear of interest rate hikes, at least for now.
And the bright side is that REITs as a group have performed well over the broader stock market over long periods of time. Here's how the total returns of the S & P 500 REIT (dividends reinvested) industry group were compared to those of the entire S & P 500
SPX, + 0.15%
on different periods. We will first display total returns, then average annual returns.
Total returns up to February 15, unless otherwise noted:
|S & P 500 REIT||S & P 500|
You can see that the 10-year numbers are skewed because at the beginning of 2009 we were close to the market trough that followed the sharp declines during the credit crisis.
It may be more useful to compare average annual total returns over long periods:
|S & P 500 REIT||S & P 500|
The figures over 15 years are particularly interesting. Despite the 2008-2009 crisis, REITs outperformed the S & P 500 index, although the full index is heavily weighted by large technology stocks, such as Facebook.
AAPL, + 0.30%
AMZN, + 1.22%
NFLX, + 1.42%
and Google Alphabet Holding Company
GOOG, + 0.44%
GOOGL, + 0.61%
S & P 500 REITs: returns and returns
Although we compared total returns to reinvested dividends, you will not reinvest if you buy REIT shares to earn income.
It is very important to take into account your investment goal. Even if you do not invest in REITs to generate income, they can help you diversify your portfolio. You must also consider the specialty and growth prospects of a REIT before deciding to invest.
Here are the 32 REITs of the S & P 500, sorted by dividend yield:
|Trust in real estate investment||Teleprinter||Primary investment activity||Dividend yield – current||Average total return – 15 years|
|Iron Mountain Inc.||
MRI + 0.77%
|Document and data storage facilities||6.96%||8.6%|
MAC + 1.17%
|Kimco Realty Corp.||
KIM, + 0.11%
WYOMING, + 0.20%
VTM + 4.01%
|Retirement Homes and Health Care Facilities||4.86%||12.4%|
HCP, + 0.39%
|Retirement Homes and Health Care Facilities||4.80%||7.2%|
|Retirement Homes and Health Care Facilities||4.48%||11.3%|
|Simon Property Group Inc.||
|Host Hotels & Resorts Inc.||
|Realty Income Corp.||
|Various commercial properties||3.86%||14.2%|
PSA + 0.08%
|Vornado Realty Trust||
|Office Buildings in New York, Chicago and San Francisco||3.84%||7.3%|
|Crown Castle International Corp||
ICC + 0.02%
|SL Green Realty Corp.||
SLG + 0.53%
|Commercial Properties in Manhattan, New York||3.71%||7.9%|
|Mid-America Apartment Communities Inc.||
|Communities of flats||3.69%||12.5%|
|Regency Centers Corp.||
REG + 0.38%
|Digital Realty Trust Inc.||
DLR + 1.20%
|Data Centers||3.51%||N / A|
|Extra Space Storage Inc.||
|Self-storage facilities||3.45%||N / A|
|Apartment Investment and Management Co. Class A||
AIV + 0.50%
|Communities of flats||3.14%||9.9%|
|AvalonBay Communities Inc.||
AVB + 0.19%
|Communities of flats||3.10%||13.6%|
|Federal Real Estate Investment Trust||
QRA, + 0.44%
|Apartments for rent||2.95%||11.7%|
UDR, + 0.29%
|Multi-family residential buildings||2.89%||11.3%|
|Duke Realty Corp.||
DRE, + 0.34%
|Alexandria Inc. Real Estate Shares||
ARE, + 0.62%
|Offices of Life Sciences and Technology||2.88%||8.9%|
|Boston Properties Inc.||
BXP, + 0.74%
LDP, + 0.27%
|Logistics and distribution facilities||2.70%||8.6%|
|Essex Property Trust Inc.||
ESS + 0.51%
|Multi-family residential buildings||2.67%||14.4%|
EQIX, + 2.18%
|American Tower Corp.||
|CBRE Group Inc. Class A||
CBRE + 0.18%
|Commercial Real Estate Services||0.00%||N / A|
|SBA Communications Corp. Class A||
|Wireless communication infrastructure||0.00%||29.3%|
So a high dividend yield can be a very good thing if your goal is income. But as you can see, the best performer in the last 15 years of the – SBA Communications Corp.
– does not even pay a dividend.
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