Economics, Housing, & Commercial Real Estate Analysis

Keepin' It Real 

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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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Hoya Capital Real Estate, LLC

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Hoya Capital Real Estate ("Hoya Capital") is an SEC-registered investment advisory firm that provides investment management services to ETFs, individuals, and institutions, focusing on portfolio and index management of publicly traded securities in the real estate industry. Nothing on this site is intended to be investment advice or an offer to buy or sell securities. The risks of investing in real estate securities are similar to those associated with direct investments in real estate, including falling property values, lack of liquidity, limited diversification, and sensitivity to certain economic factors such as interest rate changes and market recessions. No representation or warranty is made as to the efficacy of any particular strategy or fund, or the actual returns that may be achieved. An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes. Data quoted represents past performance, which is no guarantee of future results. The views and opinions in the preceding commentary are as of the date of publication and are subject to change without notice. The information presented does not reflect the performance of any fund or other account managed or serviced by Hoya Capital, and there is no guarantee that investors will experience the type of performance reflected. 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 trend cited in this market commentary will be realized. This material represents an assessment of the market environment at a specific point in time, should not be relied upon as investment advice, is not intended to predict or depict performance of any investment and does not constitute a recommendation or an offer for a particular security. We consider the information in this presentation to be accurate, but we do not represent that it is complete. It should not be relied upon as investment advice or as the sole source of suitability for investment. Please consult with your investment, tax or legal adviser regarding your individual circumstances before investing.

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