REITs provide diversification benefits as the asset shows a lower correlation to stocks and bonds. However, the asset category has recently experienced heightened volatility due to interest rate risks. Some investors fear REITs will act negatively in rising interest rate environment. The high dividends in REITs are attractive in a low-rate environment but are less enticing once safer Treasuries show higher rates. REET has a trailing 12-month dividend yield of 4.06%.
“Industrial property was the strongest developed market property sector in 2017 and continued to lead the other sectors in the first quarter of 2018 with a total return of 20% in US dollar terms over the 12 months ended March 30, 2018,” said FTSE Russell. “Demand for industrial property has increased thanks to the boom in e-commerce. While the rise of e-commerce has hurt retail, online retailers that need a physical presence to drive sales and create distribution hubs are fueling the demand for industrial properties.”
REET allocates almost 10.1% of its weight to industrial REITs. Retail REITs are the fund’s largest industry exposure at 25.59%.
For more information on real estate investment trusts, visit our REITs category.