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  • Alex Pettee, CFA

Special Dividends & Buybacks • Hot PPI • Fed Ahead

  • U.S. equity markets slipped Friday - dragging the major benchmarks to declines of over 3% on the week- after hotter-than-expected Producer Price data snapped a stretch of encouraging inflation data.

  • Pushing its declines to 3.3% on the week, the S&P 500 slipped 0.6% today while the Mid-Cap 400 and Small-Cap 600 each declined 1% to push their weekly losses to over 4%.

  • Real estate equities were among the better performers today and on the week following another positive slate of REIT dividend news. Equity REITs and Mortgage REITs each finished flat today.

  • It was another busy 24 hours of REIT dividend news. Hotel REIT Braemar Hotels (BHR) surged after reinstating its dividend and announcing a stock buyback. Office REIT Douglas Emmett (DEI) rallied despite trimming its dividend but announced a $300M stock buyback program.

  • PPI inflation data showed that wholesale prices rose slightly faster than expected in November - a setback following several encouraging inflation reports over the past month but the "internals" of the report were more encouraging.

 

Income Builder Daily Recap

U.S. equity markets slipped Friday - dragging the major benchmarks to declines of over 3% on the week - after hotter-than-expected Producer Price data snapped a stretch of encouraging inflation data. Pushing its declines to 3.3% on the week, the S&P 500 slipped 0.6% today while the Mid-Cap 400 and Small-Cap 600 declined 1% to push their weekly losses to over 4%. Real estate equities were among the better performers today and on the week following another positive slate of REIT dividend news. The Equity REIT Index finished flat today - and off by 2% on the week - while the Mortgage REIT Index finished flat as well with similar weekly declines.

Ahead of the critical Fed rate decision in the week ahead, closely-watched PPI data showed that wholesale prices rose slightly faster than expected in November - a setback following several encouraging inflation reports over the past month. Core PPI rose 0.4% from last month - above estimates of 0.2% - but the year-over-year growth rate cooled to 6.2% - the lowest annual increase since mid-2021. The "internals" of the report were more encouraging, however, as price inputs further up the supply chain - intermediate demand - were broadly lower in the month. After dipping to three-month lows earlier in the week, the 10-Year Treasury Yield jumped 8 basis points to close at 3.57% today. Crude Oil prices stabilized today - but ended the week lower by nearly 10% on mounting concerns over global economic growth.

Real Estate Daily Recap

Best & Worst Performance Today Across the REIT Sector

It was another busy 24 hours of REIT dividend news. Hotel REIT Braemar Hotels (BHR) surged more than 10% after it reinstated its quarterly dividend to $0.05/share - still below its pre-pandemic rate of $0.16/share - while also announcing a stock repurchase program of up to $25 million, representing about 10% of its market value. Office REIT Douglas Emmett (DEI) rallied more than 3% despite trimming its quarterly dividend to $0.19/share - down from its prior rate of $0.28 - but concurrently announced a new $300M share buyback program, also representing about 10% of its market value. Ryman Hospitality (RHP) hiked its quarterly dividend by 150% to $0.25/share - but still below its pre-pandemic rate of $0.95/share. W. P. Carey (WPC) - which we own in the REIT Focused Income Portfolio - hiked its quarterly dividend for the fourth time this year to $1.065/share. Lamar Advertising (LAMR) - which we we hold in the REIT Dividend Growth Portfolio held its quarterly dividend steady at $1.20/share but declared a special cash dividend of $0.30 per share.

Single-Family Rentals: Invitation Homes (INVH) announced today that it voluntarily prepaid the $560M balance of its IH 2018-1 securitization which was set to mature in March 2025 by drawing on a new term loan facility that matures in June 2029 which has a variable interest rate based on the term SOFR plus 124 basis points - currently a rate of approximately 4.90%. With the prepayment, INVH's earliest debt maturity is now 2026 and 83% of the Company’s wholly-owned properties are now unencumbered while over 99 percent its debt remains at fixed or swapped to fixed rates. Yesterday we published Single Family Rental REITs: Save The Gloom & Doom which discussed our updated sector outlook and recent portfolio allocations.

Healthcare: Welltower (WELL) rebounded today after several analysts came to its defense following a short report published earlier this week by Hindenburg Research which raised questions over a new joint venture partner on a portfolio of skilled nursing facilities. Last month, WELL announced that it would move 147 Promedica Senior Care skilled nursing assets into a joint venture that will be 15% owned by private equity firm Integra Health. The short report focused on the limited operating history of Integra Health. ProMedica released a statement clarifying Integra’s expected role with the facilities noting that “We are aware that false information about the transaction involving ProMedica’s senior care facilities has been circulating due to an investor opinion piece referenced as a research report,” the statement said. “That opinion piece contains many inaccuracies — the most obvious of which is the fact that Integra is not the proposed operator in this transaction.”


Additional Headlines from The Daily REITBeat on Income Builder

  • CSFB upgrades NHI to Neutral from Underperform (raise price target by $11 to $58)

  • Raymond James downgrades PEB, XHR to Market Perform from Outperform

  • Raymond James downgrades SHO to Underperform from Market Perform

  • WSR signed a long-term, 51,000 sf lease with EoS Fitness as the anchor at Williams Trace Plaza center in Sugar Land, TX which replaces an underutilized grocer, and is anticipated to increase traffic to the center, create greater tenant demand for spaces and potentially support the development of a future pad site at the center

  • PEI announced meaningful balance sheet improvements through successfully extending its Credit Facilities as they have met all of the requirements to exercise the one-year extension of its first and second lien Credit Facilities and has concluded the extension process where the extended maturity date is December 10, 2023

  • Income Builder Members receive access to The Daily REITBeat, an institutional-quality daily note that keeps subscribers apprised of pertinent news, data, and trends specifically within the REIT industry.

Mortgage REIT Daily Recap

Per the REIT Rankings Tracker available to Income Builder subscribers, mortgage REITs were mixed today with residential mREITs advancing 0.1% while commercial mREITs slipped 0.1%. Over the past 24 hours, Starwood Property (STWD), Annaly Capital (NLY), AGNC Investment (AGNC), and Redwood Trust (RWT) each held their dividends steady at current rates. Last week, we published Mortgage REITs: High Yields Are Fine, For Now. Mortgage REITs - which were left for dead amid a historically brutal year across fixed-income markets - have rebounded in recent weeks as earnings results were not as catastrophic as feared. Mortgage REITs are now outperforming Equity REITs for the year, and we continue to see value in a modest allocation towards higher-quality mREITs in a balanced income-focused real estate portfolio.

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 this weekend.

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.

Hoya Capital Research & Index Innovations (“Hoya Capital”) is an affiliate of Hoya Capital Real Estate, a registered investment advisory firm based in Rowayton, Connecticut that provides investment advisory services to ETFs, individuals, and institutions. Hoya Capital Research & Index Innovations provides non-advisory services including market commentary, research, and index administration focused on publicly traded securities in the real estate industry.


This published commentary is for informational and educational purposes only. Nothing on this site nor any commentary published by Hoya Capital is intended to be investment, tax, or legal advice or an offer to buy or sell securities. This commentary is impersonal and should not be considered a recommendation that any particular security, portfolio of securities, or investment strategy is suitable for any specific individual, nor should it be viewed as a solicitation or offer for any advisory service offered by Hoya Capital Real Estate. Please consult with your investment, tax, or legal adviser regarding your individual circumstances before investing.


The views and opinions in all published commentary are as of the date of publication and are subject to change without notice. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. Any market data quoted represents past performance, which is no guarantee of future results. 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 outlook made in this commentary will be realized.


Readers should understand that investing involves risk and loss of principal is possible. Investments in real estate companies and/or housing industry companies involve unique risks, as do investments in ETFs. The information presented does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes.


Hoya Capital Real Estate and Hoya Capital Research & Index Innovations have no business relationship with any company discussed or mentioned and never receives compensation from any company discussed or mentioned. Hoya Capital Real Estate, its affiliates, and/or its clients and/or its employees may hold positions in securities or funds discussed on this website and our published commentary. A complete list of holdings and additional important disclosures is available at www.HoyaCapital.com.

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