Best REIT ETFs for Dividends
May 2nd 2012 at 12:47pm by John Spence
ETFs that invest in real estate investment trusts are getting a second look from investors as a play on dividends and the multifamily sector that is profiting from rising rents.
The $12.5 billion Vanguard REIT ETF (NYSEArca: VNQ) is the largest diversified fund that follows the sector. It boasts a razor-thin expense ratio of 0.12%.
The commercial real estate fund is up 15% year to date, compared with a 10.6% gain for the S&P 500, according to Morningstar.
VNQ is yielding about 3%.
Still, investors are wary of real estate investment trusts since they crashed along with the market 2008 and failed to deliver their supposed benefits. However, a desire for income and dividends could bring investors back to this beaten-down sector and REIT ETFs. [ETF Spotlight: REITs]
“What matters isn’t how an asset performed five or ten years ago, but how it’s performing right here, right now. So as uncomfortable and improbable as it might seem, now might be an opportune time to consider adding a position in exchange-traded real estate,” writes Jonathan Hoenig at SmartMoney. “Six years after a government-created real-estate bubble burst, there are signs the asset class is finally coming up for air.”
Josh Brown at The Reformed Broker blog points out that REIT ETFs are breaking out on the charts.
“Real estate, while not improving, is not getting worse for now … and rental properties are on fire,” he wrote.
“REITs are a bit bond-like but have a volatility profile closer to stocks. They are sensitive to scary headlines … but their dividend payouts are not very volatile or sensitive at all unless the headlines translate into actual crisis,” Brown added. “REITs are not really good diversification from stocks — in a rough market, they will act just like stocks — but the yields are a nice compromise for the bond people to crawl out of their hiding spots as it dawns on them that they are being played by the current (and forever) interest rate policy.”
Vanguard REIT ETF
Other REITs ETF investments to take a look at include:
- ALPS ETF Trust Cohen & Steers Global Realty Majors ETF (NYSEArca: GRI)
- First Trust S&P REIT Index Fund (NYSEArca: FRI)
- Focus Morningstar Real Estate Index ETF (NYSEArca: FRL)
- Index IQ US Real Estate Small Cap ETF (NYSEArca: ROOF)
- iShares FTSE EPRA/NAREIT Europe Index Fund (NYSEArca: IFEU)
- iShares FTSE EPRA/NAREIT North America Index Fund (NYSEArca: IFNA)
- iShares FTSE EPRA/NAREIT Global Real Estate ex-U.S. Index Fund (NYSEArca: IFGL)
- iShares FTSE NAREIT Real Estate 50 Index Fund (NYSEArca: FTY)
- iShares FTSE NAREIT Mortgage PLUS Capped Index Fund (NYSEArca: REM)
- iShares FTSE NAREIT Residential PLUS Capped Index Fund (NYSEArca: REZ)
- iShares FTSE NAREIT Industrial/Office Capped Index Fund (NYSEArca: FNIQ)
- iShares FTSE NAREIT Retail Capped Index Fund (NYSEArca: RTL)
- iShares S&P Developed ex-U.S. Property Index Fund (NYSEArca: WPS)
- iShares Trust Dow Jones U.S. Real Estate Index Fund (NYSEArca: IYR)
- iShares Trust Cohen & Steers Realty Majors Index Fund (NYSEArca: ICF)
- Market Vectors Mortgage REIT Income ETF (NYSEArca: MORT)
- PowerShares Active U.S. Real Estate Fund (NYSEArca: PSR)
- PowerShares KBW Premium Yield Equity REIT Portfolio (NYSEArca: KBWY)
- Schwab U.S. REIT ETF (NYSEArca: SCHH)
- SPDR Dow Jones REIT ETF (NYSEArca: RWR)
- Wilshire US REIT ETF (NYSEArca: WREI)
The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.