• Alex Pettee, CFA

REIT Dividend Hike • European Lockdown • Yields Dip

Summary

  • U.S. equity markets were mixed Friday - consistent with patterns this week of large-cap outperformance and small-cap weakness - as a COVID reacceleration in Europe tempered growth and inflation expectations.

  • Hanging on to gains of 0.4% for the week, the S&P 500 slipped 0.2% today while the Mid-Cap 400 declined 0.5% and the Small-Cap 600 finished lower by 1.1%.

  • Real estate equities were lower today - but finished roughly flat on the week - as the Equity REIT Index declined 0.7% today with 4-of-19 property sectors in positive territory.

  • The reimposition of COVID-driven economic restrictions in several European countries this week - including a full lockdown and vaccine mandate imposed by Austria - pressured global interest rates.

  • Another day, another REIT dividend hike. National Storage Affiliates (NSA) hiked its dividend for the third time this year, declaring a 0.45/share quarterly dividend, a 9.8% increase from its prior rate.

Income Builder Daily Recap

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U.S. equity markets were mixed Friday - consistent with patterns this week of large-cap outperformance and small-cap weakness - as a COVID reacceleration in Europe tempered growth and inflation expectations. Hanging on to gains of 0.4% for the week, the S&P 500 slipped 0.2% today while the Mid-Cap 400 declined 0.5% and the Small-Cap 600 finished lower by 1.1%. Real estate equities were lower today - but finished roughly flat on the week - as the Equity REIT Index declined 0.7% today with 4-of-19 property sectors in positive territory while Mortgage REITs slipped 0.1%.

The reimposition of COVID-driven economic restrictions in several European countries this week - including a full lockdown and vaccine mandate imposed by Austria announced yesterday - pressured global interest rates as the 10-Year Treasury Yield retreated by another 5 basis points to close the week at 1.54%. The downward pressure on yields came despite the House passage of another proposed $2 trillion in additional government spending which faces an uncertain future in the Senate amid concerns over its impact on already historically-high levels of inflation. The tech-heavy Nasdaq (QQQ) and broader large-cap technology sector led the performance today and on the week.

Equity REIT Daily Recap

Industrial: Today we published Empty Shelves, Ample Opportunity - an exclusive report on Income Builder that discussed our existing positions - and a newly initiated position - in the industrial REIT sector. The red-hot industrial property market - "ground zero" of supply-chain shortages - continues to ride a historic demand-supply imbalance as businesses scramble to build out supply resiliency. Industrial REITs - which recorded the strongest dividend and FFO growth of any real estate sector in 2020 - continue to thrive amid "extreme competition" for logistics and distribution space. Logistics REITs surely aren't cheap, but absent significant efficiency gains in warehouse utilization, the secular tailwinds of limited supply and robust demand should persist into the back half of this decade.

Storage: Another day, another REIT dividend hike. National Storage Affiliates (NSA) hiked its dividend for the third time this year, declaring a 0.45/share quarterly dividend, a 9.8% increase from its prior dividend of $0.41. Earlier this week, Kite Realty (KRG) and Realty Income (O) each raised their dividend for the fourth time this year, three of more than 110 REITs that have raised their dividends this year.

Data Center: Earlier this week, we published Data Center REITs: Merger Mania. The Data Center REIT sector has been substantially and rapidly transformed as the three largest data center portfolio acquisitions in history have been announced in just the past several months. Digital Realty (DLR) and Equinix (EQIX) have been surprisingly quiet on the M&A front - but EQIX did announce today a partnership with DISH (DISH) to provide digital infrastructure services in support of its 5G network buildout as the lines between data center and cell tower have become quite a bit more "blurry" over the last few quarters - propelled by 5G network deployments, underscored by American Tower's (AMT) acquisition of CoreSite (COR) earlier this week.

Mortgage REIT Daily Recap

Per the REIT Rankings Tracker available to Income Builder subscribers, residential mREITs slipped 0.4% today while commercial mREITs ended lower by 0.8%. On a quiet day of mREIT newsflow, Hanon Armstrong (HASI) led to the upside while Sachem Capital (SACH) was a laggard. The average residential mortgage REIT now pays a dividend yield of 9.26% while the average commercial mortgage REIT pays a dividend yield of 6.29%.

REIT Preferreds & Capital Raising

Per the REIT Preferred Tracker available to Income Builder subscribers, REIT Preferreds advanced 0.08% today, on average, and remain higher by 8.83% on a price-return basis with total returns of roughly 14%. New York Mortgage Trust (NYMT) announced the redemption of its 7.75% Series B Cumulative Redeemable Preferred on December 18, 2021. Over in the bond markets, CubeSmart (CUBE) priced $550M of 2.25% senior notes due 2028 and $500M of 2.50% senior notes due 2032 and intends to use the net proceeds to fund a portion of the Storage West acquisition.

Income Builder Trending Reports

Below we highlight several of the most-read reports over the last 24 hours published by the Income Builder contributor team.

Economic Data This Week

We'll publish a full analysis and commentary of this week's developments in the real estate industry, as well as an analysis of the busy week of economic data in our Real Estate Weekly Outlook report published this weekend.


We're excited to announce the launch of our new investment research service here on Seeking Alpha - Hoya Capital Income Builder. We've put together a great team of contributors from across the REIT, dividend, and ETF industry, so whether your focus is High Yield or Dividend Growth, we’ve got you covered with high-quality, actionable investment research and a comprehensive suite of tools and models to help build sustainable portfolio income targeting premium dividend yields of up to 10%. And of course, subscribers receive complete access to our investment research - including reports that are never published elsewhere - from Hoya Capital and our team of contributors.

Disclosure: Hoya Capital Real Estate advises two Exchange-Traded Funds listed on the NYSE. In addition to any long positions listed below, Hoya Capital is long all components in the Hoya Capital Housing 100 Index and in the Hoya Capital High Dividend Yield Index. Index definitions and a complete list of holdings are available on our website.

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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