REITS Are Ready to Rake in Income

The economic recovery is reaching many sectors, but REITs are thriving more than most. The FTSE NAREIT All REITs index is up 26.05% this year, as of July 31. Compare that to the S&P 500 Index, which is up 17.99%. Because real estate is a hedge against inflation, REITs have benefited from recent inflation concerns. Even as those concerns abate, the economic tailwinds have kept REITs surging.

REITs are fantastic vehicles to juice income, as they are required to pay out 90% or more of their taxable income to shareholders as dividends. Individual REITs can be risky, as they require skilled management teams who are able to skillfully navigate an arcane corner of the already arcane alt space, but REIT ETFs mitigate that risk by offering broader exposure to REITs in general.

Here are three REIT ETFs investors can consider to take advantage of the current strength in the sector:

  1. The VanEck Vectors Mortgage REIT Income ETF (MORT) boasts an annual dividend yield of 7.01%. It has $328.7 million AUM, with 12.46% of that in Annaly Capital Management, Inc. (NLY), its biggest holding. Annaly is a big player in the mREIT space and takes ESG seriously, with a board of directors that is gender-balanced and placement on the FTSE Russell FTSE4Good Index, which measurez the performance of companies demonstrating strong ESG practices. AGNC Investment Corp (AGNC) slots in next at 8.63%, and 7.93% of the fund’s holdings are with Starwood Property Trust, Inc. (STWD).
  2. The Invesco S&P 500 Equal Weight Real Estate ETF (EWRE) has a dividend yield of 3.02%. Returns over the last year are at 38%. Its holdings are balanced, but include REITs that specialize in healthcare spaces, housing, and communication infrastructure.
  3. The Vanguard Real Estate ETF (VNQ) offers broad exposure to U.S. equity REITs and brings in just under 3% in dividend yields. It has nearly $44 billion in assets and its main holdings include American Tower Corporation (AMT) at 7.22%, Prologis, Inc. (PLD) at 5.32%, and Crown Castle International Corp (CCI) at 5%.

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