Data show REITs, including mortgage REITs, continue to offer more attractive yields to investors even though the pace of increases has slowed down.
The National Association of Real Estate Investment Trusts reported the dividend yield of the FTSE NAREIT All REITs Index was 4.2% in the second quarter. During the same period the FTSE NAREIT Mortgage REITs Index yielded 12.92%, led by home financing REITs with a dividend yield of 13.51%.
By comparison, the S&P 500’s dividend yield at the end of the first half was only 2.29%, NAREIT said.
What makes REITs attractive to investors, according to NAREIT executive VP of research and investor outreach Michael Grupe, is the requirement they “pay out nearly all of their taxable income to their shareholders as dividends,” which is a strong generator of income in both up and down market environments. REITs also appeal to investors concerned about “the potential of rising inflation,” he said.
Data also indicate the REIT market performance is slowing down even though quarter results remain strong.
Year-over-year and during the second quarter mortgage REITs and the overall U.S. REIT market have significantly outperformed the broader equity market, according to the National Association of Real Estate Investment Trusts.
A trend of “solid dividend yields” among REITs, which outpaced the dividend yield of the S&P 500 at the end of the first half, reinforces similarly strong performances during the first half of 2012 and over the past 12 months.
In 2Q12 the total return of the FTSE NAREIT All REITs Index was up 4.55%, while the FTSE NAREIT Mortgage REITs Index increased by 8.53% and the S&P 500 fell 2.75%.
Similarly, the total return of the FTSE NAREIT All REITs Index was up 15.43% in the first half of 2012 and the FTSE NAREIT Mortgage REITs Index was up 18.39%, compared to a 9.49% gain for the S&P 500.
On a 12-month basis at June 30 REITs more than doubled the performance of the broad market. For the 12-month period the FTSE NAREIT All REITs Index was up 12.65%, the FTSE NAREIT Mortgage REITs Index was up 10.94%, while the S&P 500 increased only 5.45%.
In the second quarter, mortgage REITs, which generated returns at 8.53%, were one of the top-performing sectors in the market ranking behind infrastructure with a 16.79% total return and health care with a 10.21% return.
Among the major equity REIT market sectors that reported gains during the quarter were retail 5.75%, office 2.76% and apartments 0.95%.
