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Nov. 2, 2019, 10:08 a.m. EDT

These stocks have the highest dividend yields in the hot real-estate sector

Negative yields abroad keep the money flowing into U.S. stocks, especially those with attractive dividends

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By Philip van Doorn, MarketWatch


Bloomberg
Shares of Public Storage have returned 27% over the past year. They have a dividend yield of 3.33%.

The real-estate sector has been the best performer in the S&P 500 Index over the past 12 months.

Earlier this month, a similar review identified the utilities sector as the 12-month winner through Oct. 1. But through Oct. 22, real estate is the 12-month champion among the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.18%  on a total-return basis (with dividends reinvested).

Before getting into real-estate companies’ performance, here are the main sectors in the benchmark index:

S&P 500 sector Total return - 12 months through Oct. 22 Total return - 3 years Total return - 5 years Total return - 10 years Total return - 15 years Weighted aggregate dividend yield
Real Estate 32.0% 42% 67% 297% 285% 2.99%
Utilities 22.8% 49% 74% 216% 343% 3.07%
Information Technology 16.1% 84% 140% 369% 473% 1.47%
Consumer Staples 15.5% 28% 53% 207% 334% 2.81%
Consumer Discretionary 13.7% 58% 98% 398% 384% 1.33%
Communications Services 12.4% 19% 33% 158% 177% 1.35%
Financials 11.4% 53% 71% 175% 77% 2.20%
Materials 11.0% 29% 32% 128% 206% 2.23%
Industrials 9.5% 42% 63% 246% 256% 1.94%
Health Care 3.0% 39% 58% 281% 349% 1.79%
Energy -14.1% -8% -18% 25% 120% 4.10%
 
S&P 500 Index 11.0% 49% 72% 238% 273% 1.97%
 Source: FactSet

Attractive dividend yields are the obvious connection between the real-estate and utilities sectors. The energy sector also sports a high aggregate dividend yield. However, oil-price uncertainty continues to weigh heavily on energy companies.

It’s also worth pointing out that the real-estate sector’s performance has typically been good or better when compared with other sectors over long periods.

Reasons for outperformance

The flight to yield continues. The yield on 10-year U.S. Treasury bonds /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -1.82%  has fallen to 1.70% from 3.14% a year ago, and Bloomberg has estimated that the total debt in Europe and Japan with negative yields to maturity exceeds $17 trillion .

In his daily “Out of the Box” opinion piece Oct. 21, B. Riley FBR chief global strategist Mark Grant wrote that many large institutional investors are “going through massive reallocations of assets programs, as they try to deal with lowered bond returns.” This means a continued flow of money into the U.S., with higher-yielding securities being especially attractive.

With the Federal Reserve cutting short-term rates three times recently and reversing its decision to shrink its balance sheet earlier this year, along with continued stimulative central bank policies in other developed economies, there’s no reason not to expect the big money flow to continue, along with plenty of support for shares of real-estate investment trusts.

S&P 500 REIT stocks

The S&P 500’s real-estate sector is made up of 31 REITs and one real-estate development company: CBRE Group /zigman2/quotes/208868148/composite CBRE +1.04% . Here’s the entire list, sorted by dividend yield, along with trailing FFO yields.

Company Ticker Dividend yield FFO Yield ‘Headroom' Total return - 12 months though Oct. 22
Macerich Co. /zigman2/quotes/203054096/composite MAC 10.26% 12.86% 2.60% -37%
Iron Mountain Inc. /zigman2/quotes/208929343/composite IRM 7.19% 6.27% -0.92% 15%
Simon Property Group Inc. /zigman2/quotes/209746667/composite SPG 5.31% 7.97% 2.66% -6%
Kimco Realty Corp. /zigman2/quotes/202836571/composite KIM 5.24% 6.69% 1.45% 53%
Host Hotels & Resorts Inc. /zigman2/quotes/201760234/composite HST 4.77% 10.79% 6.02% -7%
Weyerhaeuser Co. /zigman2/quotes/200438029/composite WY 4.67% 1.70% -2.97% 11%
Ventas Inc. /zigman2/quotes/206376229/composite VTR 4.40% 5.43% 1.03% 39%
Vornado Realty Trust /zigman2/quotes/207195881/composite VNO 4.15% 6.61% 2.47% -1%
SL Green Realty Corp. /zigman2/quotes/208985878/composite SLG 4.13% 8.33% 4.20% -7%
HCP Inc. 3.94% 4.66% 0.72% 52%
Welltower Inc. /zigman2/quotes/200485564/composite WELL 3.79% 4.48% 0.70% 52%
Realty Income Corp. /zigman2/quotes/200487782/composite O 3.42% 3.96% 0.55% 44%
Crown Castle International Corp /zigman2/quotes/202885080/composite CCI 3.40% 4.18% 0.78% 38%
Regency Centers Corp. /zigman2/quotes/202056862/composite REG 3.36% 5.51% 2.15% 15%
Public Storage /zigman2/quotes/202279720/composite PSA 3.33% 4.44% 1.11% 27%
Digital Realty Trust Inc. /zigman2/quotes/206785129/composite DLR 3.20% 4.96% 1.75% 24%
Extra Space Storage Inc. /zigman2/quotes/208054924/composite EXR 3.12% 4.12% 1.00% 39%
Federal Realty Investment Trust /zigman2/quotes/202394259/composite FRT 2.99% 4.49% 1.50% 21%
Boston Properties Inc. /zigman2/quotes/203540753/composite BXP 2.90% 5.14% 2.24% 17%
Apartment Investment and Management Co. Class A /zigman2/quotes/209177534/composite AIV 2.84% 4.69% 1.85% 34%
Mid-America Apartment Communities Inc. /zigman2/quotes/209821465/composite MAA 2.82% 4.55% 1.73% 45%
UDR Inc. /zigman2/quotes/200760603/composite UDR 2.76% 4.08% 1.33% 33%
AvalonBay Communities Inc. /zigman2/quotes/201241431/composite AVB 2.74% 4.13% 1.39% 32%
Equity Residential /zigman2/quotes/205190279/composite EQR 2.57% 3.88% 1.31% 43%
Alexandria Real Estate Equities Inc. /zigman2/quotes/206543290/composite ARE 2.55% 4.31% 1.77% 34%
Duke Realty Corp. /zigman2/quotes/200302802/composite DRE 2.53% 4.08% 1.56% 28%
Essex Property Trust Inc. /zigman2/quotes/207865118/composite ESS 2.36% 3.90% 1.54% 40%
Prologis Inc. /zigman2/quotes/200785374/composite PLD 2.33% 3.60% 1.27% 48%
Equinix Inc. /zigman2/quotes/208927761/composite EQIX 1.73% 3.85% 2.13% 41%
American Tower Corp. /zigman2/quotes/200890312/composite AMT 1.59% 3.63% 2.04% 55%
SBA Communications Corp. Class A /zigman2/quotes/208397406/composite SBAC 0.60% 3.30% 2.69% 60%
CBRE Group Inc. Class A /zigman2/quotes/208868148/composite CBRE 0.00% 3.81% 3.81% 32%
Source: FactSet

You can click on the tickers for more about each company, including its business profile.

FFO stands for funds from operations, which is a non-GAAP measure used by REITs to gauge dividend-paying ability. FFO adds depreciation and amortization back to earnings, while subtracting any gains on the sale of investments. We can calculate the FFO yield by dividing the past 12 months’ FFO by the current share price. If the FFO yield exceeds the dividend yield, it appears there is “headroom” to raise the dividend, or at least maintain the current payout. If the FFO yield is lower than the dividend yield, you had better find out why — is this a temporary decline for a specific reason?

/zigman2/quotes/210599714/realtime
US : S&P US
3,846.23
-6.84 -0.18%
Volume: 1.55B
Jan. 22, 2021 3:12p
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BX : Tullett Prebon
1.09
-0.02 -1.82%
Volume: 0.00
Jan. 22, 2021 3:11p
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/zigman2/quotes/208868148/composite
US : U.S.: NYSE
$ 65.67
+0.68 +1.04%
Volume: 776,897
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20.69
Dividend Yield
N/A
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$238,941
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US : U.S.: Nasdaq
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-0.26 -1.74%
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N/A
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0.00%
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$31.25M
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50.69
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+0.41 +0.85%
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$ 37.94
+0.38 +1.01%
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P/E Ratio
134.64
Dividend Yield
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US : U.S.: NYSE
$ 62.96
-0.06 -0.10%
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US : U.S.: NYSE
$ 63.20
+1.35 +2.19%
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Dividend Yield
3.86%
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/zigman2/quotes/200487782/composite
US : U.S.: NYSE
$ 59.58
+0.49 +0.83%
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P/E Ratio
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Dividend Yield
4.73%
Market Cap
$22.06 billion
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/zigman2/quotes/202885080/composite
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$ 159.09
-0.25 -0.16%
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Dividend Yield
3.34%
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/zigman2/quotes/202056862/composite
US : U.S.: Nasdaq
$ 46.93
+0.08 +0.17%
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P/E Ratio
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Dividend Yield
5.08%
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$ 223.02
+1.05 +0.47%
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3.58%
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Rev. per Employee
$482,512
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$ 141.92
+0.70 +0.50%
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$ 115.67
+0.98 +0.85%
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$ 88.11
+1.15 +1.32%
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$3.05M
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-0.72 -0.78%
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+0.02 +0.31%
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Dividend Yield
34.38%
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$759.30 million
Rev. per Employee
$962,415
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+0.98 +0.73%
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P/E Ratio
48.41
Dividend Yield
3.05%
Market Cap
$15.80 billion
Rev. per Employee
$653,706
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/zigman2/quotes/200760603/composite
US : U.S.: NYSE
$ 39.18
-0.10 -0.24%
Volume: 455,949
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P/E Ratio
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Dividend Yield
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US : U.S.: NYSE
$ 164.77
-0.69 -0.42%
Volume: 528,329
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P/E Ratio
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Dividend Yield
3.86%
Market Cap
$23.10 billion
Rev. per Employee
$742,490
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/zigman2/quotes/205190279/composite
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$ 61.97
+0.16 +0.26%
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P/E Ratio
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Dividend Yield
3.89%
Market Cap
$23.87 billion
Rev. per Employee
$992,524
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/zigman2/quotes/206543290/composite
US : U.S.: NYSE
$ 169.71
-1.93 -1.12%
Volume: 386,948
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P/E Ratio
39.27
Dividend Yield
2.57%
Market Cap
$24.80 billion
Rev. per Employee
$3.49M
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/zigman2/quotes/200302802/composite
US : U.S.: NYSE
$ 40.11
+0.10 +0.25%
Volume: 730,269
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P/E Ratio
68.55
Dividend Yield
2.54%
Market Cap
$15.01 billion
Rev. per Employee
$2.44M
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/zigman2/quotes/207865118/composite
US : U.S.: NYSE
$ 243.01
-2.19 -0.89%
Volume: 141,519
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P/E Ratio
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Dividend Yield
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Market Cap
$16.55 billion
Rev. per Employee
$811,650
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/zigman2/quotes/200785374/composite
US : U.S.: NYSE
$ 100.95
+0.52 +0.52%
Volume: 1.55M
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P/E Ratio
46.34
Dividend Yield
2.29%
Market Cap
$76.36 billion
Rev. per Employee
$1.95M
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/zigman2/quotes/208927761/composite
US : U.S.: Nasdaq
$ 721.13
+1.23 +0.17%
Volume: 281,136
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P/E Ratio
141.55
Dividend Yield
1.47%
Market Cap
$64.14 billion
Rev. per Employee
$659,039
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/zigman2/quotes/200890312/composite
US : U.S.: NYSE
$ 224.12
+1.92 +0.86%
Volume: 1.29M
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P/E Ratio
52.99
Dividend Yield
2.02%
Market Cap
$98.70 billion
Rev. per Employee
$1.39M
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/zigman2/quotes/208397406/composite
US : U.S.: Nasdaq
$ 271.82
-0.87 -0.32%
Volume: 307,286
Jan. 22, 2021 3:12p
P/E Ratio
N/A
Dividend Yield
0.68%
Market Cap
$30.30 billion
Rev. per Employee
$1.37M
loading...
/zigman2/quotes/208868148/composite
US : U.S.: NYSE
$ 65.67
+0.68 +1.04%
Volume: 776,897
Jan. 22, 2021 3:11p
P/E Ratio
20.69
Dividend Yield
N/A
Market Cap
$21.80 billion
Rev. per Employee
$238,941
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