To KBWY’s credit, the ETF is up more than 4% over the past year while the largest traditional REIT ETF is lower by 7.2% over the same period, suggesting high-yield REITs have performed admirably in the facing of rising rates.
Related: Factors & Financial Planning
Higher interest rates are seen as punitive to REITs’ cash flow, which can hinder the company’s ability to boost dividends, the primary allure of the asset for many investors.
Some investors fear REITs will act negatively in rising interest rate environment. The high dividends in REITs are attractive in a low-rate environment but are less enticing once safer Treasuries show higher rates.
“KBWY carries a five-star Morningstar rating and is up 36.8% over the past five years, topping the Dow Jones U.S. Real Estate Index by 460 basis points,” according to InvestorPlace.
For more information on real estate investment trusts, visit our REITs category.