U.S. REIT Dividend Yields: Cheap Things Can Get Cheaper
Callum Thomas | Feb 13, 2018 06:25AM ET
US REITs have been double-hammered by the rise in bond yields and equity market correction. Since peaking in August 2016 the Dow Jones REIT index fell -17%. By way of comparison, the S&P 500 index *rose* +19% over the same time period (even after the 10% correction), which represents a miserable -36% underperformance. It did gain some respite however, 'only' falling -9% vs -10% for the S&P 500 during the correction so far.
One positive out of that though is that the index dividend yield has risen to the highest point since the 2011 correction (which in hindsight proved an opportune buying time).
As we know (just look at the 2008 experience) cheap things can get cheaper, and dividend yields can move higher during sustained down moves and bear markets. Given that our base case is that uncertainty around the equity market, it is possible that REITs could come under further pressure.
While REITs are often thought of as a defensive asset, in this environment that has only proven partially true, and should a deeper downturn in equities take hold there will be no hiding in REITs.
However spikes in dividend yields like the one we are seeing now have in the past proven good tactical buying opportunities. So while a better opportunity to allocate to REITs may come, the case is slowly building.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.