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  • Alex Pettee, CFA

Net Lease REITs: High Yield Is Back

  • High Yield is Back: Riding the wave of dividend hikes across the real estate sector this year, net lease REITs are once again an attractive source of relatively stable high-yield income.

  • Yield-oriented investors can no longer rely on the market-cap-weighted REIT indexes, which are increasingly dominated by a handful of lower-yielding technology REITs - dragging the index average below 3%.

  • Strong earnings results confirmed that net lease REITs are again on the offensive. It's back to business-as-usual for these REITs as acquisition-fueled growth kicked into gear while rent collection fully normalized.

  • Net lease REITs thrive in the "lower for longer" macroeconomic environment, so concerns over rising rates, inflation, and potential tax code changes have pressured valuations over the past quarter.

  • The recent pullback appears to be a buying opportunity for many mid-size and smaller high-yielding REITs, which are trading at wider-than-warranted discounts to their large-cap and growth-focused peers.

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

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Hoya Capital Research & Index Innovations is an affiliated index provider and research firm that builds custom indexes tracking U.S. commercial and residential real estate sectors, including indexes tracked by exchange-traded funds (ETFs). 

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