The ALPS REIT Dividend Dogs ETF (NYSEArca: RDOG) debuted earlier this year, making it one of the newer ETFs dedicated to real estate investment trusts (REITs) and it’s fast becoming one of the more relevant ways of accessing this asset class.
The burgeoning industrial REIT group highlights a viable long-term trend for RDOG.
“Amazon.com Inc. plans to open 1,000 small delivery hubs in cities and suburbs all over the U.S., according to people familiar with the plans. The facilities, which will eventually number about 1,500, will bring products closer to customers, making shopping online about as fast as a quick run to the store. It will also help the world’s largest e-commerce company take on a resurgent Walmart Inc.,” reports Spencer Soper for Bloomberg.
Right With RDOG
RDOG, which debuted in January, tracks the S-Network REIT Dividend Dogs Index. RDOG also excludes mortgage REITs to mitigate the fund’s interest rate and credit risk and it also has an avenue for ensuring steady dividend as it mandates “constituent REITs must have Trailing Twelve Month (TTM) Funds From Operations per share (FFOPS) greater than TTM Dividend Payouts per share (DPS).
The COVID-19 pandemic is forcing a slew of malls and retail store closures across the world. In the U.S., many non-essential retailers are temporarily closed and while traditional grocery stores remain open, many shoppers are opting to order from home and not risk contracting the coronavirus by venturing outside.
“Beyond Amazon’s retail rivals, the mass opening of small, quick-delivery warehouses poses a significant threat to United Parcel Service Inc. and the U.S. Postal Service. Being fastest in the online delivery race is so critical to Amazon’s business that it doesn’t trust the job to anyone else and is pulling back from these long-time delivery partners. Amazon is basically duplicating UPS’s logistics operation. Many of Amazon’s new hubs are within walking distance of UPS facilities,” according to Bloomberg.
RDOG offers investors exposure to US companies that generate the majority of their revenue from industrial REITs that are part of the e-commerce distribution and logistics network. RDOG provides exposure to the growing e-commerce space by investing in data center and distribution center REITs, along with higher quality retail real estate.
Adding to the case for RDOG, Amazon’s “appetite for real estate is so strong that many analysts have speculated that Amazon would convert vacant department stores into distribution centers. In fact, that option is only a last resort, said the people privy to the company’s plans, who requested anonymity to discuss an internal matter,” reports Bloomberg.
Other REIT ETFs include the Schwab US REIT ETF (NYSEArca: SCHH) and the Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (SRVR).
For more on cornerstone strategies, visit our ETF Building Blocks Channel.
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.