An Income-Laden Alternative to Regular Retail ETFs | ETF Trends

Amid a recent bout of equity market of volatility, yield-generating real estate stocks and sector-related ETFs have recently outpaced broad equity benchmarks as investors looked to dividends in an attempt to cushion the fall off in equities.

Although there remains considerable consternation regarding the fate of traditional brick-and-mortar retailers in the U.S., the Pacer Benchmark Retail Real Estate SCTR ETF (NYSEArca: RTL) is up an admirable 11.54% year-to-date and is up 1.52% this month.

RTL tries to reflect the performance of the Benchmark Retail Real Estate SCTR Index, which is made up of shopping centers, shopping malls and similar structures are thriving enterprises filled with retail establishments and are located in prime locations with quality tenants throughout the country.

“Regional malls and shopping centers are becoming increasingly bifurcated between the haves and have-nots, and investors in real-estate investment trusts need to be aware of that distinction,” reports Lawrence Strauss for Barron’s, citing Wells Fargo Securities.

RTL components are screened by property, revenue and tenant types.

Marvelous Malls

“Shares of shopping center REITs have fared better in 2019 than those focused on malls. As of May 22, the ones focused on shopping centers had returned nearly 17%, compared with 4.5% for mall REITs, according to Nareit, an industry trade group,” according to Barron’s.

REITs are comprised of companies that own office towers, hotels, shopping malls and other commercial properties, offering investors exposure to the domestic economy and away from the uncertainty associated with the global supply chain, the Wall Street Journal reports.

Real estate investors also enjoy attractive dividend yield-generation, which provides an alternative to bonds as a source of income. The sector offers yields that exceed sovereign and corporate investment bonds. Unlike bond coupons, real estate dividends can grow over time, which is invaluable in periods of high growth and inflationary environments. Additionally, due to real estate’s long-term leases, they provide a more reliable source of dividends than other equities.

Wells Fargo notes “occupancy costs is the primary focus of mall retailers upon renewal with low-performers looking for relief and high-performers using leverage to minimize subsidization of weaker tenants,” according to the note cited by Barron’s

For more information on real estate investment trusts, visit our REITs category.