The demand for yield is stronger than ever, evidenced by investors searching every corner of the market for income. The relatively higher yield generated by real estate investment trusts has been popular with retail investors piling into focused exchange traded funds.
“We believe continued growth in consumer spending will help drive positive retailer sentiment, which should result in greater store openings and expansions offsetting retailer bankruptcies and store closings – i.e., greater absorption,” S&P Capital IQ said in a research note.
The Vanguard REIT ETF (NYSEArca: VNQ) is up 14.4% year-to-date, while the iShares Dow Jones U.S. Real Estate Index Fund (NYSEArca: IYR) is up 15.6%. The popularity of focused ETFs is an example of the popularity of income-generating investments in this low yield environment. VNQ yields 3.06% while yields 3.29%. The Federal Reserve announced that low rates will be around until 2015. [ETF Spotlight: REITs]
According to S&P Capital IQ, the average second-quarter occupancy was up, from 62.4% to 93.4%. [Some of S&P’s Favorite Equity ETFs]
The research company suggests the iShares FTSE NAREIT Retail Capped Index Fund (NYSEArca: RTL) to gain exposure to some of the highest rated retail REITs. The ETF devotes nearly 22% of its weight to Simon Property. Kimco, Macerich and Weingarten combine for about 19 % of the ETF’s weight. The fund yields 2.03%. [REITs: Real Estate Investment Trusts for Income & Yield]