income builder 2021 24420.png
income builder trial button.png
RIET Hoya Capital High Dividend Yield ETF.png
HOMZ_Logo_Just Ticker.png
  • Alex Pettee, CFA

Russia Tensions • Sentiment Sours • REIT Dividend Hikes

  • U.S. equity markets slid for the second straight day Friday as reports of amplified tensions on the Russia/Ukraine border reversed early-session gains while data showed consumer confidence dipping to decade-lows.

  • Ending the week with cumulative declines of 1.6%, the S&P 500 slid 1.9% today while the tech-heavy Nasdaq 100 declined another 3% and is back to 14% below its highs.

  • Real estate equities were among the outperformers today amid a wave of dividend hikes and strong earnings reports as the Equity REIT Index declined 0.8% today with 5-of-19 property sectors higher.

  • Ongoing concerns over inflation have weighed on consumer confidence in recent months, sending the University of Michigan's consumer sentiment index tumbling back to 10-year lows in February.

  • Five REITs hiked their dividends over the last 24 hours. A trio of shopping center REITs hiked their payouts: Kite Realty, Site Centers, and RPT Realty. Timber REIT Weyerhaeuser and healthcare REIT Community Healthcare each raised their dividends as well.

Income Builder Daily Recap

We recently launched Hoya Capital Income Builder - a premier income-focused investment research service through Seeking Alpha Marketplace - that will be the new exclusive home of all of Hoya Capital's investment research. Income Builder focuses on real income-producing asset classes that offer the opportunity for diversification, monthly income, capital appreciation, and inflation hedging. If you're not already on board, give us a try with a completely risk-free two-week trial and take a look around.

U.S. equity markets slid for the second straight day Friday as reports of amplified tensions on the Russia/Ukraine border reversed early-session gains while data showed consumer confidence dipping to decade-lows. Ending the week with cumulative declines of 1.6%, the S&P 500 slid 1.9% today while the tech-heavy Nasdaq 100 declined another 3% and is back to 14% below its recent highs. Real estate equities were among the outperformers today amid a wave of dividend hikes and strong earnings reports as the Equity REIT Index declined 0.8% today with 5-of-19 property sectors in positive territory while the Mortgage REIT Index declined 1.2%.

After powering through the 2.0% level for the first time since late 2019 yesterday, the 10-Year Treasury Yield retreated 8 basis points today to 1.96%, pressured by consumer sentiment data showing recession-levels of confidence amid frustration with inflation and government policy. The Energy (XLE) sector stayed red-hot, however, as Crude Oil prices climbed closer to $100/barrel. A strong earnings report from Zillow (Z) led the Hoya Capital Housing Index to another day of outperformance today ahead of a busy slate of housing data and earnings reports in the week ahead.

Ongoing concerns over inflation have weighed on consumer confidence in recent months, sending the University of Michigan's consumer sentiment index tumbling back to 10-year lows in February while expectations for one-year inflation rates increased to 5.0% - the highest level since the summer of 2008. Earlier in the week, the IBD/TIPP Economic Optimism Index showed a similar slump across all of their monthly metrics, particularly their measure of approval of Federal policies. The poll showed that only 27% of Americans believe the economy is improving, and the pollster commented, "people view a lack of trust in our politicians and government structures as one of the biggest issues we face as a nation."

Equity REIT Daily Recap

Shopping Center: Regency Centers (REG) slipped today despite reporting strong results highlighted by its highest releasing spread in more than four years at 12.9%. Regency's 2021 full-year FFO was 3% above its pre-pandemic level from 2019, becoming the first shopping center REIT to report a full-recovery. The outlook for 2022 appears conservative on the surface as REG sees its FFO moderating from this past year when it recorded 36% FFO growth, but excluding the impact of deferred rent collections last year, the numbers look solid with NOI growth of 3.5% at the initial midpoint following adjusted NOI growth of 10% in 2021. Results from Kimco (KIM), Federal Realty (FRT), and Phillips Edison (PECO) followed a similar trajectory of accelerating rent spreads and improving occupancy rates, indicating that the strip center format remains a source of strength within the retail landscape.

Net Lease: WP Carey (WPC) gained more than 2% after reporting better-than-expected results this morning and providing a solid outlook for 2022. WPC recorded full-year FFO growth of 6.2% in 2021 - above its prior guidance range - and sees growth of 4.2% in 2022 driven by nearly $2B in expected acquisition volume. Elsewhere, Alpine Income (PINE) finished lower today despite reporting solid results yesterday afternoon, finishing 2021 with AFFO growth of over 50% as the small-cap REIT continues to punch above its weight on the external growth front.

Five REITs hiked their dividends over the last 24 hours. A trio of shopping center REITs hiked their payouts: Kite Realty (KRG) raised its dividend by 5%, Site Centers (SITC) raised its payout by 8%, and RPT Realty (RPT) raised its dividend by 8%. Elsewhere, timber REIT Weyerhauser (WY) - which declared a sizable special dividend last month - raised its regular quarterly dividend by 6%. Finally, Community Healthcare (CHCT) raised its payout by 1%, bringing the full-year total to 17 hikes across the REIT sector.

Last week, we published REIT Earnings Preview: Dividend Hikes And 2022 Outlook. Highlights of next week's busy earnings slate include Spirit Realty (SRC) and Kite Realty (KRG) on Monday, Invitation Homes (INVH) and Welltower (WELL) on Tuesday, Independence Realty (IRT) and STAG Industrial (STAG) on Wednesday, and Tanger Outlets (SKT), Digital Realty (DLR), and Ventas (VTR) on Thursday. We'll continue to provide real-time coverage with our Earnings QuickTake posts for Hoya Capital Income Builder members and will publish follow-up articles summarizing our thoughts and analysis throughout earnings season.

We recently launched Hoya Capital Income Builder - the new premier investment research service focused on real income-producing assets classes. 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.

high yield REIT investing hoya capital logo.png