Scalper1 News
Real estate investment trusts or REITs certainly have reasons to cheer. The disappointing U.S. jobs data for September has pushed the possibility of a rate hike in the near term further into the dark. Headline job gains for September came in at 142,000 versus estimates of 200,000. Further, average hourly earnings in the month moved south. According to the CME FedWatch Tool , there is now a negligible 6% possibility of a rate hike at the October 28 meeting and a 39% probability at the December 16 meeting, down from 44% before the release of the weak jobs data. This means that REITs will continue to draw leverage from the near zero interest rate in nearly a decade for refinancing their debts. Lower interest rates lead to a lower borrowing cost for the REITs on which they are highly dependent for acquisitions, development and redevelopment activities. Till September this year, REITs raised $49 billion in initial capital, debt and equity capital offerings (IPOs – $1.4 billion, Secondary Common – $20.3 billion, Secondary Preferred – $2.1 billion and Secondary Debt – $25.3 billion). Apart from ultra low interest rates, the capability to generate higher dividend yields makes the investment case for REITs very strong. This is especially true when treasury yields are hovering near its lowest level since April and is down from its peak of 2.5% in June. The U.S. law requires REITs to distribute 90% of their annual taxable income in the form of dividends. This has been one of the biggest enticements for investment in REITs amid global uncertainties, both in the money and commodities markets. In fact, dividend yield of REITs came in better than the market. As of September 30, 2015, the dividend yield of the FTSE NAREIT All REITs Index was 4.44% while the yield of the FTSE NAREIT All Equity REITs Index was 3.97%. With this, REITs outstripped the 2.28% dividend yield offered by the S&P 500 (read: REIT ETFs for Income and Diversification ). ETFs in Focus In the backdrop of weak jobs report, it looks like it’s the right time to bet on the sector through ETFs, so as to reap the benefits in a safer way. We have picked four ETFs that have posted handsome gains in the past five days as well as in the past one month (see all Real Estate ETFs here). iShares U.S. Real Estate ETF (NYSEARCA: IYR ) Launched in 2000, IYR follows the Dow Jones U.S. Real Estate Index that measures the performance of the real estate industry of the U.S. equity market. The fund comprises 119 stocks with Simon Property Group Inc. (NYSE: SPG ), American Tower Corporation (NYSE: AMT ) and Public Storage (NYSE: PSA ) as the top holdings. IYR has garnered more than $4 billion assets and trades in a solid volume of nearly 10 million shares per day. The fund charges 43 bps in fees and has a dividend yield of 3.4%. It has returned 4.2% in the past five days and 5.8% over the last one month (as of October 7, 2015). It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. SPDR Dow Jones REIT ETF (NYSEARCA: RWR ) Functioning since 2001, RWR seeks investment results of the Dow Jones U.S. Select REIT Index. The fund consists of 98 stocks that have equity ownership and operate commercial real estate, with the top holdings being Simon Property Group Inc., Public Storage and Equity Residential (NYSE: EQR ). The ETF has amassed nearly $3 billion in assets and trades in a volume of 334,000 shares each day. It charges 25 bps in fees from investors per year and has a dividend yield of 3.3%. RWR gained 4% in the past five days and 7.8% in the past one month. It carries a Zacks ETF Rank #3 with a Medium risk outlook. Schwab U.S. REIT ETF (NYSEARCA: SCHH ) This fund debuted in 2011 and tracks the total return of the Dow Jones U.S. Select REIT Index. The fund consists of 99 stocks that own and operate commercial real estates. The top three holdings are Simon Property Group Inc., Public Storage and Equity Residential. SCHH has gathered $1.6 billion in assets and trades in an average volume of 386,000 shares. It charges a meager 7 bps in fees and has a distribution yield of 2.4%. The fund gained 4.1% in the past five days and 8.2% in the past one month. It holds a Zacks ETF Rank #3 with a Medium risk outlook. PowerShares KBW Premium Yield Equity REIT Portfolio ETF (NYSEARCA: KBWY ) Introduced in 2010, the fund follows the BW Nasdaq Premium Yield Equity REIT Index that measures the performance of 24 to 40 small- and mid-cap equity REITs in the U.S. It consists of 30 stocks with Government Properties Income Trust (NYSE: GOV ), Senior Housing Properties Trust (NYSE: SNH ) and STAG Industrial Inc. (NYSE: STAG ) being the top three holdings. The fund has roughly $107 million in AUM and trades in a volume of 21,000 shares per day. It charges 35 bps in annual fees and offers a robust dividend yield of 5.6%. KBWY returned 4.5% in the last five days and 7.6% in the past one month. It carries a Zacks ETF Rank #3 with a Medium risk outlook. Link to the original post on Zacks.com Scalper1 News
Scalper1 News