Real estate investment trusts (REITs) and the related ETFs took some blows earlier this year amid rampant dividend cutting and concerns about retail store closures, but the e ALPS REIT Dividend Dogs ETF (NYSEArca: RDOG) is steadying and that could be a sign of better things to come.
Adding to the case for RDOG is that it has avenues for mitigating dividend duress. 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).
In fact, a case can be made that RDOG was beaten up too much earlier this year and that it still offers opportunities for prescient investors.
“90% of REITs do not even invest in malls or office buildings. They invest in much more resilient property sectors that continue to generate steady cash flow in today’s market,” according to Seeking Alpha.
Due to longer-ranging shifts in the real estate business, RDOG could potentially be a winner over the long-term because of the changes being created by the coronavirus.
RDOG features exposure to nine REIT segments and its technology REIT weight of 11.34% is among the largest in the REIT ETF space. The new fund also has exposure to healthcare, office and retail REITs, among others.
RDOG also has an almost 12% weight to industrial REITs, a group benefiting in significant fashion from the e-commerce boom, a shift amplified by the coronavirus pandemic.
Another point in favor of RDOG is low interest rates and modest inflation – two scenarios that should little of sign of changing anytime soon.
“The last time the Fed started increasing interest rates it was in late 2015 when inflation was running at 1.5% and unemployment was 5%,” notes Seeking Alpha. “It took many years to get there in the recovery of the great financial crisis. But this time, the inflation would need to be much higher before the Fed would return to increasing interest rates.”
Other real estate funds include the FlexShares Global Quality Real Estate Index Fund (GQRE) and the Schwab US REIT ETF (NYSEArca: SCHH).
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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.