The Global X Super Dividend REIT ETF (SRET) is known for its hefty yield, even by real estate sector standards.
The Global X exchange traded fund, which follows the Solactive Global SuperDividend REIT Index, invests in the 30 highest-yielding global real estate investment trusts (REITs). So perhaps it’s not surprising that SRET’s trailing 12-month dividend yield of 6.79%, according to issuer data, is well above the comparable metric found on more basic REIT ETFs.
SRET has another benefit worth considering: exposure to consolidation amongst gaming REITs. Due to the small number of such companies, publicly traded casino landlords are often overlooked relative to broader real estate industries.
However, there’s mergers and acquisitions afoot in this group. Last Wednesday, VICI Properties (NYSE: VICI) announced that it is purchasing rival MGM Growth Properties (NYSE: MGP) for $17.2 billion in equity. MGP was the ETF’s tenth-largest holding as of Aug. 3.
SRET’s 3.52% weight to MGP, the owner of most of the property on which MGM Resorts casinos operate, is the largest among all ETFs, according to ETF Research Center data.
That deal is expected to close in the first half of 2022, so there’s time to see how the Solactive Global SuperDividend REIT Index will treat VICI. The simple addition of VICI to the index could be beneficial to investors. Following the marriage, the combined firm will own the real estate of many of the most famous Las Vegas casinos and an array of regional gaming properties as well. Plus, both real estate companies have established histories of consistent dividend increases, long-term rental agreements, and inflation-fighting escalators in those pacts.
When that deal is completed there will be just two public companies in this corner of the REIT universe – the new VICI and Gaming and Leisure Properties (NASDAQ: GLPI).
Gaming and Leisure Properties is SRET’s number 12 holding at a weight of 3.31%. While it may not be a takeover target today, GLPI is liked by some Wall Street analysts.
“Additionally, the resilience of regional gaming tenants and the strength of lease terms have been proven in the last year, with GLPI unexpectedly reaching the benchmark for its May 2021 escalators,” said UBS analyst Robyn Farley in a note out Wednesday.
She raised her rating on the SRET component to “buy” from “neutral” with a $54 price target, which is slightly above the Wall Street average of $52.
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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.