It's no wonder why so many real estate investment trusts (REITs) have terrible market performance in 2022. After all, the Federal Reserve's ongoing rate hikes will continue to hurt the real estate sector.
Currently, exchange traded funds (ETFs) are down further than the S&P 500 — which is down roughly 17% year-to-date — it may be wise to stash these three funds in your watchlist.
Once the Fed decides to make a pivot, it will eventually be less expensive to borrow money for loans (REITs outperformed the S&P 500 from 1972 to 2019 with annual returns of 13.3% compared to 12.1%, respectively). Until then, these three REIT ETFs are offering steady dividends and will help diversify your portfolio:
Invesco KBW Premium Yield Equity REIT ETF KBWY offers a dividend yield of 6.78% or $1.40 per share annually, making monthly payments, with an inconsistent track record of increasing its dividends. The fund invests at least 90% of its total assets in the securities of small- and mid-cap equity REITs that have competitive dividend yields and are in the KBW Nasdaq Premium Yield Equity REIT Index.
Invesco's top three holdings include:
- Global Net Lease GNL making up 6.63% of the fund
- Office Properties IT OPI totaling 6.29% of the portfolio, and
- Necessity Retail REIT RTL totaling 5.97% of the portfolio.
iShares Trust iShares Global REIT ETF REET offers a dividend yield of 3.88% or 89 cents per share annually, using quarterly payments, with an inconsistent track record of increasing its dividends. The fund tracks the investment results of an index composed of global real estate equities in developed and emerging markets.
iShares' top three holdings include:
- Prologis PLD totaling 7.73% of the fund
- Equinix EQIX accounting for 4.31% of the ETF
- Public Storage PSA which accounts for 3.36% of the portfolio.
Vanguard Real Estate ETF VNQ offers a dividend yield of 3.65% or $3.12 per share annually, through quarterly payments, with an infrequent track record of increasing its dividends. Vanguard Real Estate ETF seeks to provide high income and moderate long-term capital growth by investing in stocks issued by commercial REITs, primarily in companies that purchase office buildings, hotels, and other real property. Vanguard tracks the performance of the MSCI US Investable Market Real Estate 25/50 Index.
Vanguard's top three REIT holdings include:
- Prologis PLD making up 7.26% of the ETF
- American Tower AMT accounting for 6.71% of the fund, and
- Crown Castle CCI which accounts for 4.1% of the portfolio.
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