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  • Alex Pettee, CFA

REIT Dividend Hikes • Jobless Claims Rise • Stocks Rebound

  • U.S. equity markets snapped a five-day skid Thursday after jobless claims data showed signs of further softening in labor markets while investors looked ahead of a closely-watched PPI report tomorrow.

  • Trimming its week-to-date declines to roughly 2.5%, the S&P 500 advanced 0.8% today while the tech-heavy Nasdaq 100 rebounded by 1.2%.

  • Real estate equities were broadly higher today following another wave of REIT dividend hikes. Equity REITs advanced 0.7% with 14-of-18 property sectors in positive territory while Mortgage REITs gained 0.6%.

  • Four REITs hiked their dividends over the past 24 hours including CubeSmart (CUBE) and American Tower (AMT). Hotel REITs Park Hotels (PK) and Chatham Lodging (CLDT) each reinstated their dividends which were suspended since the pandemic.

  • Continuing jobless claims rose to the highest levels since early February, posting the largest three-week increase since the depths of the pandemic in May 2020. Unadjusted initial claims jumped by nearly 90k last week driven by large increases in California and New York.

 

Income Builder Daily Recap

U.S. equity markets snapped a five-day skid Thursday after jobless claims data showed signs of further softening in labor markets while investors looked ahead of a closely-watched Producer Price Index report on Friday. Trimming its week-to-date declines to roughly 2.5%, the S&P 500 advanced 0.8% today while the tech-heavy Nasdaq 100 rebounded by 1.2%. Real estate equities were broadly higher today following another wave of REIT dividend hikes. The Equity REIT Index advanced 0.7% with 14-of-18 property sectors in positive territory while the Mortgage REIT Index gained 0.6%. The Hoya Capital Housing Index continued its recent rebound after Freddie Mac data showed that the 30-Year Fixed Mortgage Rate fell for a fourth week to 6.33% - a full 75 basis points below its highs in early November of 7.08%.


Bonds snapped a two-day rally, however, despite employment data showing that continuing jobless claims rose to the highest levels since early February at 1.7 million for the week ended Nov. 26 - the largest three-week increase since the depths of the pandemic in May 2020. Unadjusted initial claims jumped by nearly 90k last week driven by large increases in California and New York. After dipping to three-month lows yesterday, the 10-Year Treasury Yield (US10Y) rebounded by 8 basis points to close at 3.49%. Crude Oil prices ended the day lower by 1.5% - giving back a mid-day surge following a reported leak in the Keystone pipeline. Nine of the eleven GICS equity sectors were higher on the day with Technology (XLK) stocks leading on the upside while Energy (XLE) stocks lagged.

Real Estate Daily Recap

Best & Worst Performance Today Across the REIT Sector

Four REITs hiked their dividends over the past 24 hours. CubeSmart (CUBE) - which we own in the REIT Dividend Growth Portfolio - advanced 1.5% after hiking its quarterly dividend by 14% to $0.49/share. American Tower (AMT) - which we also own in the Dividend Growth Portfolio - gained 0.5% afer it hiked its quarterly dividend for the fourth time this year to $1.56/share quarterly - up 6.1% from last quarter and 12.2% from last year. Park Hotels (PK) raised its quarterly dividend to $0.25/share - up from the prior rate of $0.01 but still below the $0.45/share paid before the pandemic. PK noted that $0.12/share represents the fourth quarter payment based on 2022 results of operations, while the remaining $0.13 per share is attributable to gains from the sale of Park’s assets during 2022. Chatham Lodging (CLDT) rallied more than 3% after reinstating its quarterly dividend at $0.07/share after having been suspended since March 2020.

Mall: Small-cap Pennsylvania REIT (PEI) - which emerged from a brief bankruptcy last year - surged more than 15% today after announcing that it extended its credit facility by one year after it met all of the requirements under its first and second lien credit facilities which now have a maturity date of December 10, 2023. PEI also noted that it has sold assets generating $110M in proceeds so far in 2022 and has applied asset sale proceeds and excess cash from operations to pay down debt by $148M through October 31, 2022. Last week in Mall REITs: The Bleeding Has Stopped we noted that following nearly three years of rental rate and occupancy declines, the supply-demand dynamic has recently favored retail landlords, rewarding mall REITs with some long-elusive pricing power.

Single-Family Rentals: Today we published Single Family Rental REITs: Save The Gloom & Doom on the Income Builder Marketplace which discussed our updated sector outlook and recent portfolio allocations. SFR REITs have uncharacteristically lagged - dipping by more than 30% this year - swept up by stiff headwinds across the housing industry from the historic surge in mortgage rates. Cooling home price appreciation and tightening credit conditions is indeed bad news for many new “start-up” entrants into the SFR scene that are learning the hard way that the SFR game is a capital-intensive business that requires significant scale to operate profitably. Despite the sharp rate-driven housing cooldown, household formations have actually accelerated this year, lifted by historic levels of inbound immigration and an uptick in birth rates - challenging two core tenants of housing skeptics' prognoses.

Additional Headlines from The Daily REITBeat on Income Builder

  • Goldman Sachs upgrades AIRC ($43), AMH ($39), MAA ($194) to Buy from Neutral

  • Goldman Sachs downgrades AVB ($187), INVH ($35), TCN ($9.50) to Neutral from Buy

  • AvalonBay (AVB) completed an underwritten public offering of $350 million aggregate principal amount of 5.00% senior unsecured notes due 2033

  • Xenia Hotels (XHR) completed the previously announced disposition of the 189-room Kimpton Hotel Monaco Denver for $69.75 million (~$369,000/key) where proceeds will be utilized for general corporate purposes, which may include share repurchases, debt repayment, capital expenditures and acquisitions consistent with its long-term strategy

  • Veris Residential (VRE) celebrated the one-year anniversary of its rebranding—an effort undertaken to align the Company's brand with its corporate values, multifamily-focused strategic direction, and objective of generating long-term value for shareholders.

  • Income Builder Members receive access to The Daily REITBeat, an institutional-quality daily note that keeps subscribers apprised of pertinent news, data, and trends specifically within the REIT industry.

Mortgage REIT Daily Recap

Per the REIT Rankings Tracker available to Income Builder subscribers, mortgage REITs were mostly-higher today with residential mREITs advancing 0.5% while commercial mREITs gained 0.3%. Over the past 24 hours, all four REITs that declared dividends held their levels steady at current rates including Annaly Capital (NLY), Redwood Trust (RWT), Ellington Financial (EFC), and Ellington Residential (EARN). Last week, we published Mortgage REITs: High Yields Are Fine, For Now. Mortgage REITs - which were left for dead amid a historically brutal year across fixed-income markets - have rebounded in recent weeks as earnings results were not as catastrophic as feared. Mortgage REITs are now outperforming Equity REITs for the year, and we continue to see value in a modest allocation towards higher-quality mREITs in a balanced income-focused real estate portfolio.

Economic Data This Week

The economic calendar slows down this week, headlined by the Producer Price Index on Friday which investors - and the Fed - are hoping to show that the fastest pace of year-over-year increases is finally behind us. The headline PPI is expected to moderate to a 7.2% year-over-year rate while the Core PPI is expected to decelerate slightly to 5.9%. On Friday, we'll also get our first look at Michigan Consumer Sentiment for December. The Fed is particularly interested in the 5-Year Inflation Expectations survey, looking for signs of a potential "wage-price inflation spiral" through elevated consumer wage expectations. We'll also see a handful of Purchasing Managers Index ("PMI") reports throughout the week from S&P Global and the Institute for Supply Management. Both of these major surveys posted readings below the breakeven-50 level in their preliminary November data.

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.

Hoya Capital Research & Index Innovations (“Hoya Capital”) is an affiliate of Hoya Capital Real Estate, a registered investment advisory firm based in Rowayton, Connecticut that provides investment advisory services to ETFs, individuals, and institutions. Hoya Capital Research & Index Innovations provides non-advisory services including market commentary, research, and index administration focused on publicly traded securities in the real estate industry.


This published commentary is for informational and educational purposes only. Nothing on this site nor any commentary published by Hoya Capital is intended to be investment, tax, or legal advice or an offer to buy or sell securities. This commentary is impersonal and should not be considered a recommendation that any particular security, portfolio of securities, or investment strategy is suitable for any specific individual, nor should it be viewed as a solicitation or offer for any advisory service offered by Hoya Capital Real Estate. Please consult with your investment, tax, or legal adviser regarding your individual circumstances before investing.


The views and opinions in all published commentary are as of the date of publication and are subject to change without notice. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. Any market data quoted represents past performance, which is no guarantee of future results. There is no guarantee that any historical trend illustrated herein will be repeated in the future, and there is no way to predict precisely when such a trend will begin. There is no guarantee that any outlook made in this commentary will be realized.


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