After enduring some patches earlier this year, some real estate investment trusts (REITs) are finding their footing, potentially enhancing the long-term set for ETFs, such as the ALPS REIT Dividend Dogs ETF (NYSEArca: RDOG).
Fixed income investors know that yield is hard to come across these days—unless investors are willing to take on more risk by accepting more duration in safe haven government debt, opting for high yield, or looking at opportunities overseas—to name a few. On the other hand, RDOG offers an alternative to those prosaic income-generating assets.
“Quality, well-managed REITs today produce high single-digit total returns to asset value by these approaches. Over the long run, the markets are an evaluating mechanism and this value will be reflected in stock prices,” according to Seeking Alpha.
RDOG Is No DOG
Low-interest rates thanks to the Federal Reserve electing to keep interest rates near zero through the year 2022 can give rookie real estate investors the opportunity to diversify their portfolios with tangible, real assets. However, not everyone can own a piece of real estate just yet and one option can be real estate investment trusts (REITs)
As an equal-weight ETF, RDOG is under-weight some of the REIT segments that were drubbed earlier this year and those that were home to a spate of negative dividend action. Likewise, the fund is overweight some of the fast-growing REIT industries that are performing well and not slashing dividends. Think data center and industrial REITs.
RDOG tracks the S-Network REIT Dividend Dogs Index, a benchmark that’s similar to those found on ALPS’ other dividend dogs ETFs.
Additionally, RDOG features stout exposure to industrial and technology REITs, two of the best-performing sectors in the real estate sector.
While some analysts are speculating that industrial REITs could be confounded by weakening consumer confidence on par with retail ETFs, other data points suggest RDOG is positioned to endure retail weakness. In fact, thanks to the e-commerce boom, the ETF is poised to thrive as shoppers move online.
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.
Other real estate funds include the FlexShares Global Quality Real Estate Index Fund (GQRE) and the Schwab US REIT ETF (NYSEArca: SCHH).
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.
