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A REIT ETF With A Whopping Yield

September 20, 2016 2:08 pm
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Real estate investment trusts (REITs) and the relevant exchange-traded funds have been in the spotlight for much of this year, and much of that attention has been positive.

With the Federal Reserve laying off on boosting interest rates, income investors have had plenty of reasons to embrace REIT ETFs. Real estate stocks also receive increased attention in anticipation of the group becoming the eleventh GICS sector, a move that recently became official. Broadly speaking, investors can find yields north of three percent or close to four percent on traditional REIT ETFs.

Boosting Yield

Investors willing to do a bit of digging can really bolster their yields with some overlooked REIT ETFs, including the Global X SuperDividend REIT ETF (NASDAQ: SRET). The Global X SuperDividend REIT ETF, which tracks the Solactive GlobalSuperDividend REIT Index, is a year and a half old and is home to 30 of the world's highest-yielding publicly traded REITs.

Related Link: Did You Know There’s A Student Housing REIT?

“REITs can appreciate or depreciate depending on the value of their properties, projected growth rates, interest rates, and other factors. Larger REITs tend to hold a more diversified portfolio of properties, enabling those REITs to mitigate the idiosyncratic risks inherent in investing in only a handful of buildings. Smaller REITs, on the other hand, can provide more targeted exposure to a particular geography or property type,” according to Global X Research.

Although it is a “global ETF,” SRET allocates nearly 87 percent of its weight to U.S. REITs with Canada and Singapore combining for the rest of the ETF's weight. In addition to yield, where SRET departs from traditional REIT ETFs is in industry allocations.

The Case For mREITs

For example, high-yielding mortgage REITs (mREITs) are over 42 percent of SRET's weight. While there are ETFs dedicated to mREITs, standard REIT ETFs are usually lightly allocated to this asset class. Diversified REITs are almost 31 percent of SRET's lineup.

MREITs “profit by making the difference between the income received from the mortgage payments and the interest expense on their debt. The payoff tends to be greater when the yield curve is steeper, which means that the difference on the yield of long term mortgages versus short term debt is greater,” according to Global X.

SRET has a trailing 12-month yield of almost 8.6 percent and pays a monthly dividend.

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