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Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

REIT Preferreds: Higher-Yield Without Excess Risk

  • REIT preferred stocks were one of the few places to hide within the high-yield real estate segment amid the violent volatility that rocked REITs during the depths of the pandemic.

  • Exhibiting fixed-income-like investment characteristics, among REITs that offer preferred shares, the performance of these securities has been an average of 17.4% higher in 2020 than their comparable common shares.

  • Excluding the handful of troubled retail and lodging REITs that have suspended their preferred distributions, dividend yields currently average around 7.0% compared to the 4.7% yield on REIT common stock.

  • Total returns of REIT preferreds have lagged the REIT common stock index, but REIT preferreds have exhibited significantly lower volatility, translated into risk-return ratios roughly on-par with REIT common shares.

  • We introduce our all-new REIT Preferred and Bond Tracker and highlight a handful of our favorite preferred issues. We also take a look at several ETFs and CEFs that focus on REIT preferreds.

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