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  • Alex Pettee, CFA

REITs On Top • Stocks Slip • Strong Jobs Data

Summary

  • U.S. equity markets were lower Thursday on another quiet trading session despite strong initial jobless claims data which provided further evidence that U.S. consumers are unfazed by the COVID reacceleration.

  • Retreating from yesterday's 70th record closing high of 2021, the S&P 500 slipped 0.3% today while the Mid-Cap 400 and the Small-Cap 600 each declined 0.2%.

  • Real estate equities were again among the leaders today as the Equity REIT Index advanced 0.4% with 16-of-19 property sectors in positive territory while the Mortgage REIT Index declined by 0.3%.

  • Absent some extreme volatility tomorrow, REITs will end the year as the best-performing major asset class with total returns of roughly 40% amid a robust recovery and historic year of dividend increases.

  • Casino REIT Gaming & Leisure Properties (GLPI) announced yesterday afternoon that it completed its previously announced transaction to acquire the land and real estate assets of Live! Casino & Hotel Maryland from The Cordish Companies for $1.14 billion.

Income Builder Daily Recap

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U.S. equity markets were lower Thursday on another quiet trading session despite strong initial jobless claims data which provided further evidence that U.S. consumers and businesses are largely unfazed by the COVID reacceleration. Retreating from yesterday's 70th record closing high of 2021, the S&P 500 slipped 0.3% today while the Mid-Cap 400 declined 0.3% and the Small-Cap 600 fell 0.5%. Real estate equities were again among the leaders today as the Equity REIT Index advanced 0.4% with 16-of-19 property sectors in positive territory while Mortgage REITs declined by 0.3%.

Absent some extreme volatility tomorrow, REITs will end the year as the best-performing major asset class with total returns of roughly 40% amid a robust recovery and historic year of dividend increases. Despite better-than-expected Initial and Continuing Jobless Claims data this morning, seven of the eleven GICS equity sectors were lower on the day, dragged on the downside by modest declines from the Energy (XLE) and Technology (XLK) sectors. Shares of cruise line operators were under pressure after the U.S. CDC published new recommendations to avoid cruise travel "regardless of vaccination status."

Equity REIT & Homebuilder Daily Recap

Casinos: Gaming & Leisure Properties (GLPI) announced yesterday afternoon that it completed its previously announced transaction to acquire the real estate assets of Live! Casino & Hotel Maryland from The Cordish Companies for $1.14 billion. GLPI also entered into a single asset triple net lease with Cordish, under which Cordish will continue its management of the operations of Live! Maryland. The lease has an initial annual cash rent of $75.0M and an initial term of 39 years with a maximum term of 60 years, as well as a fixed annual lease escalation of 1.75% beginning in the lease's third year. Last week we published Casino REITs: The House Always Wins, which discussed our updated outlook for the casino REIT sector.

Hotels: Yesterday, we published Hotel REITs: Unfazed by Omicron. In a twist of fate, after posting dramatic gains during the vaccine development stages, hotel REITs have been the weakest-performing property sector since vaccines became widely available in late April. Encouragingly, recent TSA travel data has indicated that the Omicron effect is surprisingly muted as the domestic travel recovery has continued this holiday season after a brief pull-back in early December. Hotel occupancy - which is closely correlated with domestic airline travel - has exhibited similar resilience over the past two quarters and managed to climb back above the 20-Year average in early December for the first time since the pandemic began. In the report, we discussed our top picks in the sector and our updated outlook.

Cell Tower: Earlier this week, we published Cell Tower REITs: Living On The Edge. Cell Tower REITs have been one of the primary 'growth engines' of the REIT sector, but are poised to snap their six-year-streak of outperformance versus the broad-based REIT Index this year. The recent slump began around mid-year as several risk factors emerged including potential competition from Low-Earth-Orbit satellite networks and delays in 5G deployment over airline interference concerns. The near- and medium-term outlook for cell tower REITs remains promising, however, but some caution is warranted given their potential longer-term technological risk.

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.