ETF Spotlight on the Vanguard REIT ETF (NYSEArca: VNQ), part of an ongoing series. The real estate investment trust ETF is yielding more than 3%. The REIT fund has a three-year annualized return of 20%, compared with 13% for SPDR S&P 500 (NYSEArca: SPY).
Assets: $17.2 billion.
Objective: The Vanguard REIT ETF tries to reflect the performance of the MSCI US REIT Index, which holds stocks issued by real estate investment trusts companies that purchase office buildings, hotels and other real property.
Holdings: Top holdings include Simon Property Group (NYSE: SPG) 10.7%, Public Storage (NYSE: PSA) 4.7%, HCP Inc. (NYSE: HCP) 4.6%, Ventas (NYSE: VTR) 4.3% and Equity Residential (NYSE: EQR) 4.1%.
What You Should Know:
- Vanguard sponsors the fund.
- VNQ has a 0.10% expense ratio.
- The fund has 117 holdings and the top ten make up 45.5% of the overall portfolio.
- As of Jan. 31, sub-sector allocations include: diversified REITs 7.6%, industrial REITs 5.3%, office REITs 13.9%, residential REITs 17.1%, retail REITs 27.4% and specialized REITs 28.7%.
- This ETF does not include exposure to mortgage REITs.
- VNQ has a 3.43% 12-month yield. [Dividend Investors Pouring Money Into Real Estate ETFs]
- The ETF is up 1.2% over the past month, up 8.9% over the last three months and up 17.5% in the past year.
- The fund is 5.3% above its 200-day exponential moving average.
- “Equity REITs are a hybrid asset class, offering yield and the possibility of capital appreciation,” according to Morningstar analyst Abby Woodham. “These firms generate income by managing properties and collecting rent. They are required to distribute at least 90% of their taxable income to shareholders, which is the source of their desirable yield.”
- “In the past, REITs were viewed as a liquid way to buy commercial real estate and improve a portfolio’s diversification,” Woodham added. “Real estate also has some inflation-hedging qualities.”
The Latest News:
- The FTSE NAREIT ALL REIT Index has returned 6.05% year-to-date, compared to the S&P 500 6.61% year-to-date gains.
- Industrial REITs are benefiting from the increased demand for warehousing during the economic recovery, posting a 8.9% YTD return, according to eProp.
- However, there are still some lingering concerns about growth in retail, and overall retail REITs have gained 5.59% YTD.
- Office REITs have gained 5.59% YTD.
- Mortgage REITs were among the strongest performers so far this year, rising 11.44% YTD.
- “The real Glossary Link estate sector is currently benefiting from a number of tailwinds that include the general search for higher yield (REITs pay dividends) and lower volatility, better data emerging from key markets and the U.S. Federal Reserve’s continued focus on the mortgage and housing markets,” EPFR Global said in a press release.
Vanguard REIT ETF
For past stories in this series, visit our ETF Spotlight category.
Max Chen contributed to this article.