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.