By Philip van Doorn, MarketWatch
Real estate investment trusts, or REITs, are usually considered income investments, so some investors panic and sell them when interest rates are rising. But the Federal Reserve’s recent change in policy should put that fear to rest.
Meanwhile, you can see that REITs have performed very well compared to the broader stock market in the long run. We list S&P 500 REITs, sorted by yield, below.
We pointed out in August that a knee-jerk reaction to avoid REITs when interest rates are rising isn’t supported by performance. A rising-rate environment is typically one that also features significant economic growth, which means a REITs’ rental income and earnings will rise. This tends to offset negative price action from rising rates.
The Fed’s recent change in direction may have eliminated the usual fear of interest-rate increases, at least for now.
And the silver lining is that REITs as a group have measured up well against the broader stock market over long periods. Here’s how the S&P 500 REIT industry group’s total returns (with reinvested dividends) have compared to the entire S&P 500 /zigman2/quotes/210599714/realtime SPX +0.08% over various periods. First, we’ll show total returns and then average annual returns.
Total returns through Feb. 15, except as indicated:
|S&P 500 REITs||S&P 500|
You can see that the 10-year figures are distorted because in early 2009, we were close to the market bottom that followed the deep declines experienced during the credit crisis.
It might be more useful to compare average annual total returns over long periods:
|S&P 500 REITs||S&P 500|
The 15-year figures are particularly interesting. Despite the 2008-2009 crisis, the REITs have performed better than the S&P 500, even though the full index is so heavily weighted to large tech stocks, such as Facebook /zigman2/quotes/205064656/composite FB +1.66% , Apple /zigman2/quotes/202934861/composite AAPL +0.51% , Amazon /zigman2/quotes/210331248/composite AMZN +0.57% , Netflix /zigman2/quotes/202353025/composite NFLX +1.25% and Google holding company Alphabet /zigman2/quotes/205453964/composite GOOG +0.47% /zigman2/quotes/202490156/composite GOOGL +0.64% .
S&P 500 REITs: yields and returns
While we have compared total returns with dividends reinvested, you won’t be reinvesting if you are buying REIT shares for income.
It is very important to consider your investment objective. Even if you are not investing in REITs for income, they can help you diversify your portfolio. You should also consider a REIT’s particular specialty and growth prospects when deciding whether to invest.
Here are all 32 REITs in the S&P 500, sorted by dividend yield:
|Real estate investment trust||Ticker||Primary investing activity||Dividend yield - current||Average total return - 15 years|
|Iron Mountain Inc.||/zigman2/quotes/208929343/composite IRM||Document and data storage facilities||6.96%||8.6%|
|Macerich Co.||/zigman2/quotes/203054096/composite MAC||Commercial properties||6.87%||4.6%|
|Kimco Realty Corp.||/zigman2/quotes/202836571/composite KIM||Shopping centers||6.31%||2.9%|
|Weyerhaeuser Co.||/zigman2/quotes/200438029/composite WY||Timberland||5.32%||3.7%|
|Ventas Inc.||/zigman2/quotes/206376229/composite VTR||Senior housing and health care properties||4.86%||12.4%|
|HCP Inc.||/zigman2/quotes/231028144/composite HCP||Senior housing and health care properties||4.80%||7.2%|
|Welltower Inc.||/zigman2/quotes/200485564/composite WELL||Senior housing and health care properties||4.48%||11.3%|
|Simon Property Group Inc.||/zigman2/quotes/209746667/composite SPG||Shopping malls||4.36%||13.2%|
|Host Hotels & Resorts Inc.||/zigman2/quotes/201760234/composite HST||Hotels||4.29%||5.8%|
|Realty Income Corp.||/zigman2/quotes/200487782/composite O||Diverse commercial properties||3.86%||14.2%|
|Public Storage||/zigman2/quotes/202279720/composite PSA||Self-storage facilities||3.85%||13.8%|
|Vornado Realty Trust||/zigman2/quotes/207195881/composite VNO||Office buildings in New York, Chicago and San Francisco||3.84%||7.3%|
|Crown Castle International Corp||/zigman2/quotes/202885080/composite CCI||Cellular towers||3.75%||17.9%|
|SL Green Realty Corp.||/zigman2/quotes/208985878/composite SLG||Commercial properties in Manhattan, New York||3.71%||7.9%|
|Mid-America Apartment Communities Inc.||/zigman2/quotes/209821465/composite MAA||Apartment communities||3.69%||12.5%|
|Regency Centers Corp.||/zigman2/quotes/202056862/composite REG||Shopping centers||3.53%||7.4%|
|Digital Realty Trust Inc.||/zigman2/quotes/206785129/composite DLR||Data centers||3.51%||N/A|
|Extra Space Storage Inc.||/zigman2/quotes/208054924/composite EXR||Self-storage facilities||3.45%||N/A|
|Apartment Investment and Management Co. Class A||/zigman2/quotes/209177534/composite AIV||Apartment communities||3.14%||9.9%|
|AvalonBay Communities Inc.||/zigman2/quotes/201241431/composite AVB||Apartment communities||3.10%||13.6%|
|Federal Realty Investment Trust||/zigman2/quotes/202394259/composite FRT||Retail properties||3.01%||11.7%|
|Equity Residential||/zigman2/quotes/205190279/composite EQR||Rental apartment properties||2.95%||11.7%|
|UDR Inc.||/zigman2/quotes/200760603/composite UDR||Multifamily residential properties||2.89%||11.3%|
|Duke Realty Corp.||/zigman2/quotes/200302802/composite DRE||Industrial properties||2.89%||5.1%|
|Alexandria Real Estate Equities Inc.||/zigman2/quotes/206543290/composite ARE||Life sciences and technology office campuses||2.88%||8.9%|
|Boston Properties Inc.||/zigman2/quotes/203540753/composite BXP||Office properties||2.84%||11.2%|
|Prologis Inc.||/zigman2/quotes/200785374/composite PLD||Logistics and distribution facilities||2.70%||8.6%|
|Essex Property Trust Inc.||/zigman2/quotes/207865118/composite ESS||Multifamily residential properties||2.67%||14.4%|
|Equinix Inc.||/zigman2/quotes/208927761/composite EQIX||Data centers||2.34%||20.6%|
|American Tower Corp.||/zigman2/quotes/200890312/composite AMT||Communications infrastructure||1.89%||20.7%|
|CBRE Group Inc. Class A||/zigman2/quotes/208868148/composite CBRE||Services to the commercial real-estate industry||0.00%||N/A|
|SBA Communications Corp. Class A||/zigman2/quotes/208397406/composite SBAC||Wireless communications infrastructure||0.00%||29.3%|
So a high dividend yield can be a very good thing if income is your objective. But as you can see, the best 15-year performer on the — SBA Communications Corp. /zigman2/quotes/208397406/composite SBAC -2.37% — doesn’t even pay a regular quarterly dividend.
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