Remarkable REITs (1/15)

This article highlights the recent strong performance, and broad diversification, in real estate investment trust (REIT) indexes. Last quarter, we mentioned that Calpers and S&P Dow Jones Indices both have big plans to increase their real estate exposure.

Even Japan’s Government Pension, the world’s largest at $1.4 trillion, is shifting in the direction of Yale’s ETF portfolio prescription.

See InvestableBenchmarks.com. ETF PM currently has long positions in VNQ, ICF, URE, and DRN.

US Equity REITs’ Remarkable Year

Erika Morphy, 1/9/15

WASHINGTON, DC—By any measure—and we are about to discuss two of them—US REITs had a banner year in 2014. Industry association NAREIT reports that US REITs doubled both the total return and dividend yield of the S&P 500 by yearend. SNL Financial has separately reported much the same.

The FTSE NAREIT All REITs Index finished the year with a total return of 27.15% and a dividend yield of 4% at December 31. The FTSE NAREIT All Equity REITs Index produced a 28.03% total return and a 3.56% dividend yield at year-end. The FTSE NAREIT Mortgage REITs Index delivered a 17.88% total return with a 10.66% dividend yield by December 2014.

By contrast, the S&P 500 produced a 13.69% total return for the year with a 2% dividend yield at year-end.

In short, REITs continued their long-standing track record of beating the equity market, NAREIT president and CEO Steven A. Wechsler, says in a prepared statement. “The compound annual total returns of the FTSE NAREIT All Equity REITs Index have outperformed those of the S&P 500 for the past 1-, 5-, 10-, 15-, 20-, 25-, 35-, and 40-year periods ending December 31, 2014.”

SNL, for its part, calculates that its SNL US REIT Equity index finished the year with a dividend yield of 3.43%, compared to the 10-year Treasury note yield of 2.17% at yearend. The spread between the SNL US REIT Equity index and the 10-year T-Note grew to 126 basis points at year-end 2014 from 87 basis points at year-end 2013.

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