The coronavirus pandemic punished real estate investment trusts (REITs) earlier this year, but amid expectations that cyclical and value stocks will perform well in 2021, the ALPS REIT Dividend Dogs ETF (NYSEArca: RDOG) merits consideration.
RDOG tracks the S-Network REIT Dividend Dogs Index, a benchmark that’s similar to those found on ALPS’ other dividend dogs ETFs.
To conclude 2020, the real estate sector and RDOG are bouncing back, indicating these assets could be in style in 2021 as interest rates remain low.
“Real estate investment trusts (REITs) are an undervalued opportunity for 2021 as it underperformed this year due to fears of a repeat of the Global Financial Crisis (GFC), according to American Century Investments,” reports Money Management.
REITs and the RDOG ETF Methodology
RDOG also has a layer of payout protection not found in rival REIT ETFs. The fund requires member firms to have Trailing Twelve Month (TTM) Funds From Operations per share (FFOPS) that exceed TTM Dividend Payouts per share (DPS). That’s an important trait when considering the rough payout environment endured by REITs in the first half of 2020.
A variety of technological themes are becoming increasingly relevant in the real estate industry. However, many of the traditional exchange traded funds addressing this sector lack the necessary exposure to this trend. For its part, RDOG features robust exposure to industrial and technology REITs, the real estate assets at the center of disruptive trends such as 5G and e-commerce.
As more retailers scale up online operations, they need warehouse space – a theme RDOG is levered to. Those companies also require technology infrastructure and data centers, which RDOG also provides exposure to. The technology upgrade cycle for retailers is still in its formative stages. Even with those growth drivers, RDOG still has a value proposition.
“Vidya Rajappa, American Century vice president, portfolio manager and head of portfolio management for multi-asset strategies, said the key difference was the US credit market had improved significantly and the leverage in the REIT market was lower,” reports Money Management.
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.