There are hundreds of ETFs offering investors exposure to real estate investment trusts (REITs). However, the REIT ETFs offering substantial out-performance over the past couple of years are those with significant exposure to more nuanced concepts, such as data center and technology REITs – subsectors that are usually smaller parts of traditional funds in this category.
Real estate investors also enjoy attractive dividend yield-generation, which provides an alternative to bonds as a source of income. The sector offers yields that exceed sovereign and corporate investment bonds. Unlike bond coupons, real estate dividends can grow over time, which is invaluable in periods of high growth and inflationary environments. Additionally, due to real estate’s long-term leases, they provide a more reliable source of dividends than other equities.
Boosting data center and technology REIT exposure could be the impetus for an upcoming index change for the Schwab US REIT ETF (NYSEArca: SCHH). Bloomberg’s Morgan Barna reports that SCHH is transitioning to an index that includes more data center REITs and real estate firms with exposure to the 5G rollout.
A document found on the Schwab website indicates the issuer plans to move SCHH to the Dow Jones Equity All REIT Capped Index “on or about June 22.” SCHH currently tracks the Dow Jones U.S. Select REIT Index.
Smart Move
SCHH will remain a diversified REIT ETF and will continue excluding mortgage REITs. The move more data center could prove rewarding over the long-term, but for investors looking for a dedicated play on that theme, there’s the Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (SRVR).
The Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF is a strategy-driven ETF that aims to offer investors exposure to U.S. companies that generate the majority of their revenue from real estate operations in the data and infrastructure sector. There are significant real estate demands associated with the 5G rollout, enhancing the 5G ETF status of the Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF.
SRVR is a strategy-driven ETF that aims to offer investors exposure to U.S. companies that generate the majority of their revenue from real estate operations in the data and infrastructure sector. It relies on dividends and REIT income and invests in a variety of tech infrastructure companies.
Datacenter exposure is meaningful. Over the past year, SRVR is up 15.22% while SCHH is down 23.51%.
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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.
