By Philip van Doorn, MarketWatch
For a few of the companies, FFO figures weren’t available, so we used trailing free cash flow yields instead. A company’s free cash flow is its remaining cash flow after planned capital expenditures. Free cash flow yield figures appear in the FFO yield column for CBRE Group and Weyerhaeuser /zigman2/quotes/200438029/composite WY +0.83% .
Income-seeking investors may be excited by some of the high yields at the top of the list. But beware — some of the highest-yielding REITs are also some of the worst-performing, at least recently. This is why, before considering an individual REIT investment, you need to do your own research to understand a company’s specialty, that particular industry and think about whether the company’s long-term strategy seems reasonable.
Analysts’ ratings
Here’s the list again, in the same order, with a summary of sell-side analysts’ opinions:
| Company | Ticker | Share 'buy' ratings | Share 'hold' ratings | Share 'sell' ratings | Closing price - Oct. 22 | Consensus price target | Implied 12-month upside potential |
| Macerich Co. | /zigman2/quotes/203054096/composite MAC | 17% | 72% | 11% | $29.23 | $35.15 | 20% |
| Iron Mountain Inc. | /zigman2/quotes/208929343/composite IRM | 46% | 36% | 18% | $33.97 | $35.27 | 4% |
| Simon Property Group Inc. | /zigman2/quotes/209746667/composite SPG | 67% | 33% | 0% | $154.51 | $178.68 | 16% |
| Kimco Realty Corp. | /zigman2/quotes/202836571/composite KIM | 17% | 66% | 17% | $21.39 | $19.16 | -10% |
| Host Hotels & Resorts Inc. | /zigman2/quotes/201760234/composite HST | 41% | 36% | 23% | $16.78 | $18.73 | 12% |
| Weyerhaeuser Co. | /zigman2/quotes/200438029/composite WY | 77% | 15% | 8% | $29.13 | $30.50 | 5% |
| Ventas Inc. | /zigman2/quotes/206376229/composite VTR | 17% | 74% | 9% | $71.99 | $71.37 | -1% |
| Vornado Realty Trust | /zigman2/quotes/207195881/composite VNO | 36% | 57% | 7% | $63.65 | $70.25 | 10% |
| SL Green Realty Corp. | /zigman2/quotes/208985878/composite SLG | 44% | 45% | 11% | $82.31 | $93.06 | 13% |
| HCP Inc. | 52% | 43% | 5% | $37.52 | $36.01 | -4% | |
| Welltower Inc. | /zigman2/quotes/200485564/composite WELL | 33% | 62% | 5% | $91.92 | $89.79 | -2% |
| Realty Income Corp. | /zigman2/quotes/200487782/composite O | 29% | 62% | 9% | $79.72 | $78.76 | -1% |
| Crown Castle International Corp | /zigman2/quotes/202885080/composite CCI | 41% | 47% | 12% | $141.30 | $142.85 | 1% |
| Regency Centers Corp. | /zigman2/quotes/202056862/composite REG | 74% | 26% | 0% | $69.65 | $71.94 | 3% |
| Public Storage | /zigman2/quotes/202279720/composite PSA | 14% | 57% | 29% | $240.54 | $247.00 | 3% |
| Digital Realty Trust Inc. | /zigman2/quotes/206785129/composite DLR | 46% | 50% | 4% | $134.81 | $128.86 | -4% |
| Extra Space Storage Inc. | /zigman2/quotes/208054924/composite EXR | 25% | 50% | 25% | $115.22 | $117.10 | 2% |
| Federal Realty Investment Trust | /zigman2/quotes/202394259/composite FRT | 72% | 28% | 0% | $140.46 | $141.88 | 1% |
| Boston Properties Inc. | /zigman2/quotes/203540753/composite BXP | 57% | 43% | 0% | $130.84 | $144.15 | 10% |
| Apartment Investment and Management Co. Class A | /zigman2/quotes/209177534/composite AIV | 35% | 53% | 12% | $54.85 | $54.21 | -1% |
| Mid-America Apartment Communities Inc. | /zigman2/quotes/209821465/composite MAA | 47% | 47% | 6% | $136.38 | $130.29 | -4% |
| UDR Inc. | /zigman2/quotes/200760603/composite UDR | 32% | 64% | 4% | $49.71 | $49.42 | -1% |
| AvalonBay Communities Inc. | /zigman2/quotes/201241431/composite AVB | 35% | 65% | 0% | $221.83 | $222.40 | 0% |
| Equity Residential | /zigman2/quotes/205190279/composite EQR | 13% | 74% | 13% | $88.44 | $83.58 | -5% |
| Alexandria Real Estate Equities Inc. | /zigman2/quotes/206543290/composite ARE | 60% | 40% | 0% | $157.14 | $157.73 | 0% |
| Duke Realty Corp. | /zigman2/quotes/200302802/composite DRE | 69% | 31% | 0% | $34.05 | $35.53 | 4% |
| Essex Property Trust Inc. | /zigman2/quotes/207865118/composite ESS | 44% | 52% | 4% | $330.99 | $325.86 | -2% |
| Prologis Inc. | /zigman2/quotes/200785374/composite PLD | 74% | 26% | 0% | $90.81 | $91.97 | 1% |
| Equinix Inc. | /zigman2/quotes/208927761/composite EQIX | 88% | 8% | 4% | $569.93 | $580.32 | 2% |
| American Tower Corp. | /zigman2/quotes/200890312/composite AMT | 33% | 61% | 6% | $226.74 | $225.71 | 0% |
| SBA Communications Corp. Class A | /zigman2/quotes/208397406/composite SBAC | 31% | 63% | 6% | $244.98 | $254.00 | 4% |
| CBRE Group Inc. Class A | /zigman2/quotes/208868148/composite CBRE | 44% | 56% | 0% | $51.71 | $59.50 | 15% |
| Source: FactSet | |||||||
REIT ETFs
For investors who want broad exposure to U.S. REITs, there are many exchange traded funds available. It’s important to keep in mind that the distribution yields include capital-gains distributed as part of the ETFs’ dividends. If you consider an ETF, read carefully about the nature of the dividend distributions and consider tax consequences. Here are six REIT ETFs as examples:
• The SPDR Real Estate Select Sector ETF /zigman2/quotes/207325179/composite XLRE +0.49% holds the 32 stocks in the S&P 500 real-estate sector and has a distribution yield of 2.85%, net of annual expenses of 0.13% of assets. The portfolio totals $4.1 billion.
• The SPDR Dow Jones REIT ETF /zigman2/quotes/201703743/composite RWR +1.63% has $2.7 billion in assets and tracks the Dow Jones U.S. Select REIT Index. The ETF holds 95 stocks. Its distribution yield is 3.19% and the annual expense ratio is 0.25%.
• The Schwab U.S. REIT ETF /zigman2/quotes/204218354/composite SCHH +0.93% has $6.1 billion in assets and also tracks the Dow Jones U.S. Select REIT Index. It has a distribution yield of 2.67% and a 0.07% expense ratio.
• The iShares U.S. Real Estate ETF /zigman2/quotes/202389641/composite IYR +0.82% has $4.83 billion in assets and tracks the Dow Jones U.S. Real Estate Index, holding 115 stocks. The distribution yield is 2.56% and the expense ratio is 0.42%.
• The iShares Cohen & Steers REIT ETF /zigman2/quotes/208006168/composite ICF +0.68% is concentrated, holding the largest 30 U.S. REITs. The portfolio has $2.4 billion, the dividend yield is 2.32% and the expense ratio is 0.34%.
• The Vanguard Real Estate ETF /zigman2/quotes/202931846/composite VNQ +0.86% is huge, with $47 billion in assets as it tracks the MSCI U.S. IMI Real Estate 25/50 Index by holding 183 stocks. According to FactSet: “The only place it deviates is the persistent sector bias away from specialized REITs in favor of commercial REITs.” Vanguard quotes a distribution yield of 2.95% as of Sept. 30. The expense ratio is 0.12%.
Don’t miss: How to identify U.S. stocks with attractive growth potential
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CBRE
