Aided by a significant drop by 10-year Treasury yield, real estate investment trust (REIT) exchange traded funds were among 2014’s top performing sector ETFs and that trend is continuing this year as income investors continue the hunt for yield.
The Bloomberg REIT Index is nearing its record high set almost eight years ago. So is the MSCI REIT Index, the benchmark for the Vanguard REIT ETF (NYSEArca: VNQ), the largest U.S. REIT ETF.
“The Bloomberg index’s dividend yield as of yesterday was 3.38 percent, or a full percentage point greater than the yield on the Treasury’s 30-year bond. The gap exceeded 1 point last week for the first time since June 2012, according to data compiled by Bloomberg. The MSCI index had an even higher yield, 3.53 percent,” writes David Wilson for Bloomberg.
VNQ gained 30.4% last year, about double the gains for the benchmark financial services index, on its way to collecting $4.76 billion in new assets. VNQ is up nearly 7% in 2015. [REIT ETFs Outperform]
VNQ just 0.1% per year. That makes is less expensive than 92% of rival REIT funds. The SPDR Dow Jones REIT ETF (NYSEArca: RWR) was even more impressive last year, surging nearly 32%. With a trailing 12-month dividend yield north of 3%, RWR is also up nearly 7% to start 2015.
Investors’ affinity for REIT has not dampened in 2015 as VNQ has added over $439 million in new assets.