Real estate investment trusts (REITs) and the related ETF are often embraced by income-seeking investors on the basis of above-average dividend yields. The Global X Super Dividend REIT ETF (NasdaqGS: SRET) takes the REIT yield concept to another level with a 30-day SEC yield of 7.89%.
SRET invests in real estate investment trusts (REITs), which gives real estate exposure to investors seeking that diversification of their portfolio through alternative assets. REITs are entities formed for the sole purpose of investing in real estate using pooled capital to purchase properties.
The $461.8 million SRET, which turns five years old in March, seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Global SuperDividend REIT Index. The underlying index tracks the performance of REITs that rank among the highest-yielding REITs globally, as determined by Solactive AG, the provider of the underlying index.
“While SRET has delivered an average annualized return of about 9% since inception, it is no free lunch. Its holdings generally have slightly higher debt levels than they’re lower-yielding peers,” according to Seeking Alpha. “In my opinion, a recession will have less of a negative impact on these REITs than the last since it owns generally cheap properties and real estate is historically inexpensive, but a major tightening in credit conditions could threaten dividends.”
SRET’s Super Perks
SRET gives investors more diversification by looking at opportunities around the globe as opposed to staying within domestic borders. The fund screens for only the highest yielding opportunities no matter what part of the globe that yield happens to be in. SRET also pays a monthly dividend.
International REITs may offer diversification benefits as individual property sectors behave differently from one country to another due to different economic and local circumstances. International real estate has generally demonstrated imperfect correlation relative to U.S. real estate over time, which has led to lower volatility and potentially greater risk-adjusted returns.
Over the past three years, SRET modestly outperformed a lower-yielding international REIT ETF as well as the largest domestic equivalent. Plus, SRET offers a surprising valuation proposition.
“Overall, I cannot find any major financial red flags in these companies and believe they’re about as risky as your typical REIT as reflected in their volatility level. Put simply, SRET’s simple strategy may actually be picking undervalued firms,” according to Seeking Alpha.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, 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.
