For Immediate Release
Chicago, IL – April 24, 2013 – Today, Zacks Investment Ideas feature highlights Features: Vanguard REIT ETF ( (
VNQ
- ETF report
)
), iShares Dow Jones U.S. Real Estate Index Fund ( (
IYR
- ETF report
)
) and SPDR Dow Jones REIT ETF (RWR).
3 Excellent REIT ETFs You Should Not Ignore
As investors continue to search for yield in the current environment of ultra low rates, REITs are becoming increasingly popular due to their solid dividend payouts. In addition to attractive income, REITs have rewarded investors with excellent capital appreciation over longer term. Further, they add diversification benefits to the portfolio and also act as an inflation hedge.
What are REITs?
REITs own and operate income-producing real estate. They are required to distribute at least 90% of their taxable income to shareholders annually in the form of dividends and in turn, they can deduct those dividends paid from their corporate taxable income.
The Outlook Remains Strong
With gradually improving economy and low interest rates (at least through 2014), the outlook for REITs remains strong. (Read: 4 Excellent Dividend ETFs for Income and Stability)
Residential real estate market has most likely bottomed out and commercials real estate prices are also now significantly up from their year ago levels.
Further, with increasing rents and improving occupancy, the industry fundamentals are expected to remain strong.
REITs in general are now much less leveraged compared to historical levels and many have refinanced their debt at much lower interest rates. Also, many REITs were able to acquire premium properties at attractive prices during the downturn.
Beware of Mortgage REITs’ Risks
Unlike equity REITs, mortgage REITs do not hold properties, but they invest mainly in mortgage backed securities (MBS) issued by Fannie Mae and Freddie Mac. They use short-term debt for financing their purchases and are usually highly leveraged.
Mortgage REITs have done very well of late as investors have been pouring in money, due to their double digit yield yields.
They have benefitted from low short term rates but increasing purchases of MBSs by the Fed under QE3 is now driving the yields lower, putting pressure on Mortgage REITs’ profitability. Further, due to their high leverage, they are exposed to greater risk once interest rates start going up. (Read: Best ETF Strategies for 2013)
Looking at the Performance
After their plunge in 2008, REITs recovered nicely and have been outperforming the broader market for the last four years. While volatility has been high if we look at five years’ history (mainly due to massive plunge in 2008), it has been in-line with the broader market if we look at one year’s performance.
|
Based on one year price performance
|
|
|
|
|
SPY
|
VNQ
|
IYR
|
RWR
|
|
Annualized St. Dev*
|
12.82%
|
12.52%
|
11.95%
|
12.63%
|
|
Annualized Return*
|
13.02%
|
13.99%
|
14.79%
|
12.33%
|
|
Based on five years price performance
|
|
|
|
|
SPY
|
VNQ
|
IYR
|
RWR
|
|
Annualized St. Dev**
|
18.96%
|
32.62%
|
31.24%
|
33.05%
|
|
Annualized Return**
|
6.56%
|
11.42%
|
9.89%
|
10.02%
|
*Using daily price returns
**Using monthly price returns
Vanguard REIT ETF ( (
VNQ
- ETF report
)
)
VNQ tracks the MSCI US REIT Index that covers about two-thirds of the value of the entire U.S. REIT market. Launched in September 2004, this fund has attracted about $19.1 billion in assets so far, making it the largest product in this space.
The fund has highest allocation to Specialized REITs (30.8%) followed by Retail REITs (26.7%) and Residential REITs (16.2%).
The fund is one of the low cost choices in the space, charging only 10 bps in annual fees from investors Further, it is quite is liquid as it trades in high volumes of 2.6 million shares per day on an average. It currently yields a solid 3.3% in annual dividends.
iShares Dow Jones U.S. Real Estate Index Fund ( (
IYR
- ETF report
)
) )
IYR seeks to replicate the Dow Jones U.S. Real Estate Index, before fees and expenses, and holds 89 securities in the basket.
Launched in June 2000, the fund has so far garnered $5.9 billion in assets. It chares 47 bps in annual fees and pays out an attractive 12-month dividend yield of 3.41%. The fund is extremely liquid with an average daily trading volume of about 5.4 million shares.
Like VNQ, SPG occupies the top position in the basket with 8.3% allocation, while American Tower and HCP rounded out the top three.
Among sector holdings, Specialty REITs (29.8%), Retail REITs (20.3%) and Industrial REITs (18.1%) occupy the top three spots.
SPDR Dow Jones REIT ETF (RWR)
RWR tracks the Dow Jones U.S. Select REIT Index which follows companies that operate commercial real estate properties across the country.
The fund which made its debut in April 2001 has amassed over $2.3 billion in assets so far. It charges investors 25 basis points annually for operating expenses.
Like VNQ, SPG, PSA and HCP occupy the top three positions in the fund’s basket of assets. Looking at the sector exposure, Regional Malls take the top spot in the basket with 18.4% share while Apartments (17.6%) and Healthcare (15.2%) round out the top three.
The fund pays out about 2.7% in annual dividend yield while trading volume is about 18 thousand shares on a daily basis.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Len Zacks. The company continually processes stock reports issued by 3,000 analysts from 150 brokerage firms. It monitors more than 200,000 earnings estimates, looking for changes.
Then when changes are discovered, they’re applied to help assign more than 4,400 stocks into five Zacks Rank categories: #1 Strong Buy, #2 Buy, #3 Hold, #4 Sell, and #5 Strong Sell. This proprietary stock picking system; the Zacks Rank, continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter Profit from the Pros. In short, it’s your steady flow of profitable ideas GUARANTEED to be worth your time. Get your free subscription to Profit from the Pros at: http://at.zacks.com/?id=7298
Follow us on Twitter: http://twitter.com/ZacksResearch
Join us on Facebook: http://www.facebook.com/ZacksInvestmentResearch
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
http://www.zacks.com
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For Immediate Release
Chicago, IL – April 24, 2013 – Today, Zacks Investment Ideas feature highlights Features: Vanguard REIT ETF ( ( VNQ - ETF report ) ), iShares Dow Jones U.S. Real Estate Index Fund ( ( IYR - ETF report ) ) and SPDR Dow Jones REIT ETF (RWR).
3 Excellent REIT ETFs You Should Not Ignore
As investors continue to search for yield in the current environment of ultra low rates, REITs are becoming increasingly popular due to their solid dividend payouts. In addition to attractive income, REITs have rewarded investors with excellent capital appreciation over longer term. Further, they add diversification benefits to the portfolio and also act as an inflation hedge.
What are REITs?
REITs own and operate income-producing real estate. They are required to distribute at least 90% of their taxable income to shareholders annually in the form of dividends and in turn, they can deduct those dividends paid from their corporate taxable income.
The Outlook Remains Strong
With gradually improving economy and low interest rates (at least through 2014), the outlook for REITs remains strong. (Read: 4 Excellent Dividend ETFs for Income and Stability)
Residential real estate market has most likely bottomed out and commercials real estate prices are also now significantly up from their year ago levels.
Further, with increasing rents and improving occupancy, the industry fundamentals are expected to remain strong.
REITs in general are now much less leveraged compared to historical levels and many have refinanced their debt at much lower interest rates. Also, many REITs were able to acquire premium properties at attractive prices during the downturn.
Beware of Mortgage REITs’ Risks
Unlike equity REITs, mortgage REITs do not hold properties, but they invest mainly in mortgage backed securities (MBS) issued by Fannie Mae and Freddie Mac. They use short-term debt for financing their purchases and are usually highly leveraged.
Mortgage REITs have done very well of late as investors have been pouring in money, due to their double digit yield yields.
They have benefitted from low short term rates but increasing purchases of MBSs by the Fed under QE3 is now driving the yields lower, putting pressure on Mortgage REITs’ profitability. Further, due to their high leverage, they are exposed to greater risk once interest rates start going up. (Read: Best ETF Strategies for 2013)
Looking at the Performance
After their plunge in 2008, REITs recovered nicely and have been outperforming the broader market for the last four years. While volatility has been high if we look at five years’ history (mainly due to massive plunge in 2008), it has been in-line with the broader market if we look at one year’s performance.
Based on one year price performance
SPY
VNQ
IYR
RWR
Annualized St. Dev*
12.82%
12.52%
11.95%
12.63%
Annualized Return*
13.02%
13.99%
14.79%
12.33%
Based on five years price performance
SPY
VNQ
IYR
RWR
Annualized St. Dev**
18.96%
32.62%
31.24%
33.05%
Annualized Return**
6.56%
11.42%
9.89%
10.02%
*Using daily price returns
**Using monthly price returns
Vanguard REIT ETF ( ( VNQ - ETF report ) )
VNQ tracks the MSCI US REIT Index that covers about two-thirds of the value of the entire U.S. REIT market. Launched in September 2004, this fund has attracted about $19.1 billion in assets so far, making it the largest product in this space.
The fund has highest allocation to Specialized REITs (30.8%) followed by Retail REITs (26.7%) and Residential REITs (16.2%).
The fund is one of the low cost choices in the space, charging only 10 bps in annual fees from investors Further, it is quite is liquid as it trades in high volumes of 2.6 million shares per day on an average. It currently yields a solid 3.3% in annual dividends.
iShares Dow Jones U.S. Real Estate Index Fund ( ( IYR - ETF report ) ) )
IYR seeks to replicate the Dow Jones U.S. Real Estate Index, before fees and expenses, and holds 89 securities in the basket.
Launched in June 2000, the fund has so far garnered $5.9 billion in assets. It chares 47 bps in annual fees and pays out an attractive 12-month dividend yield of 3.41%. The fund is extremely liquid with an average daily trading volume of about 5.4 million shares.
Like VNQ, SPG occupies the top position in the basket with 8.3% allocation, while American Tower and HCP rounded out the top three.
Among sector holdings, Specialty REITs (29.8%), Retail REITs (20.3%) and Industrial REITs (18.1%) occupy the top three spots.
SPDR Dow Jones REIT ETF (RWR)
RWR tracks the Dow Jones U.S. Select REIT Index which follows companies that operate commercial real estate properties across the country.
The fund which made its debut in April 2001 has amassed over $2.3 billion in assets so far. It charges investors 25 basis points annually for operating expenses.
Like VNQ, SPG, PSA and HCP occupy the top three positions in the fund’s basket of assets. Looking at the sector exposure, Regional Malls take the top spot in the basket with 18.4% share while Apartments (17.6%) and Healthcare (15.2%) round out the top three.
The fund pays out about 2.7% in annual dividend yield while trading volume is about 18 thousand shares on a daily basis.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Len Zacks. The company continually processes stock reports issued by 3,000 analysts from 150 brokerage firms. It monitors more than 200,000 earnings estimates, looking for changes.
Then when changes are discovered, they’re applied to help assign more than 4,400 stocks into five Zacks Rank categories: #1 Strong Buy, #2 Buy, #3 Hold, #4 Sell, and #5 Strong Sell. This proprietary stock picking system; the Zacks Rank, continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter Profit from the Pros. In short, it’s your steady flow of profitable ideas GUARANTEED to be worth your time. Get your free subscription to Profit from the Pros at: http://at.zacks.com/?id=7298
Follow us on Twitter: http://twitter.com/ZacksResearch
Join us on Facebook: http://www.facebook.com/ZacksInvestmentResearch
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
http://www.zacks.com
Read the full ETF report on VNQ
Read the full ETF report on IYR