Despite mixed signals coming from the real estate sector, REITs continue to attract investors.
The popularity makes sense, too, given that real estate investment trusts are still outperforming the broader equity markets.
For the second quarter, the FTSE NAREIT All REITs Index gained 2.9%, according to a report released Thursday by the National Association of Real Estate Investment Trusts. That compares with a 1% gain by the S&P 500.
Through the first six months of the year, the REIT index outperformed large-caps, gaining 9.9%, while the S&P 500 was up 6%. Over the 12-month period through June 30, the REIT index gained 32.9%, compared with 30.7% for the S&P 500.
REITs also continued to reward income-seeking investors by generating a cash dividend yield of 4.3% during the first half, or more than double the dividend yield of companies in the S&P 500.
“The consistently strong REIT dividend is a critical driver of REITs' total-return performance,” said Steven Wechsler, NAREIT's president and chief executive.
“Over longer holding periods, dividends have accounted for more than 60% of the total returns to REIT shareholders,” he said. “Their proven ability to provide reliable income has made REITs a key element of the investment strategies of both younger investors who are building portfolios and retirees who are relying on them to meet their expenses.”
The timber and self-storage categories have been the strongest recent REIT performers, with timber up 16.7% and self-storage up 15.1% in the first half.
Among the larger REIT sectors, apartments led with a 14.1% total return in the first half, followed by the office sector, which was up 12.5%.
Capital raising for REITs is on pace to surpass the $49 billion peak in 2006, which included 199 secondary offerings and five initial public offerings. Through the first half this year, REITs raised $36 billion through 108 secondary offerings and five IPOs.
E-mail Jeff Benjamin at [email protected].
