• Alex Pettee, CFA

Stocks Jump • REIT Dividend Boost • Inflation Records

Summary

  • U.S. equity markets rallied Thursday as strong corporate earnings reports and encouraging employment data offset ongoing inflation concerns following data showing that producer prices soared by the most on record.

  • Delivering its strongest gains since March, the S&P 500 gained 1.2% today while the Mid-Cap 400 finished higher by 1.7% and the Small-Cap 600 climbed 1.2%.

  • Real estate equities were again among the leaders for the fourth-straight day as the Equity REIT Index gained 1.2% today with all 19 property sectors in positive territory.

  • Net Lease REIT Agree Realty (ADC) boosted its dividend for the second time this year, raising its payout by 5%. ADC is one of 110 REITs that has raised its dividend thus far in 2021.

  • Producer Prices rose 8.6% in September from the prior year - the fastest annual rate on record - but the month-over-month gain was also the slowest of the year.

Real Estate Daily Recap

U.S. equity markets rallied Thursday as strong corporate earnings reports and encouraging employment data offset ongoing inflation concerns following data showing that producer prices soared by the most on record. Delivering its strongest gains since March, the S&P 500 gained 1.2% today while the Mid-Cap 400 finished higher by 1.7% and the Small-Cap 600 climbed 1.2%. Real estate equities were again among the leaders for the fourth-straight day as the Equity REIT Index gained 1.2% today with all 19 property sectors in positive territory while Mortgage REITs climbed 0.4%.

Gains were broad-based toady as all eleven GICS equity sectors finished higher today, led to the upside by the Materials (XLB), Technology (XLK), and Industrials (XLI) sectors. While the annual rise in producer prices was the highest on record at 8.6%, the month-over-month gain in September was also the slowest pace of the year, sparking a bid for bonds as the the 10-Year Treasury Yield declined 3 basis points to 1.52% today after topping four-month highs at 1.60% last week. Homebuilders and the broader Hoya Capital Housing Index were also among the leaders today ahead of key earnings reports across the housing sector next week.

Equity REITs

Net Lease: Agree Realty (ADC) boosted its dividend for the second time this year, raising its payout by 5%. ADC is one of 110 REITs that has raised its dividend thus far in 2021. Elsewhere, a handful of REITs maintained their dividends at current levels including Office Properties Income (OPI) Industrial Logistics (ILPT), Service Properties (SVC), and STAG Industrial (STAG). Following the wave of pandemic-driven dividend cuts across the REIT sector last year, we've seen a similarly powerful wave of dividend increases this year.

Homebuilders: Tomorrow morning, we will publish Shortages Everywhere which will discuss recent trends in the homebuilding sector. Homebuilders - which emerged as unexpected leaders early in the pandemic - dipped into "bear market territory" in early October as supply chain headwinds, soaring home prices, and rising rates spooked investors. Record-low supply levels and robust single-family housing demand sent home prices soaring, discouraging potential buyers. Surging rents - and a desire an for inflation-hedging asset - have again sparked recent demand. Housing remains a deeply “unloved” sector despite the compelling long-term tailwinds at its back. Remarkably, homebuilders trade with single-digit forward P/E multiples despite their strong projected growth rates.

Mortgage REITs

Per our Mortgage REIT Tracker, mREITs were mixed today as commercial mREITs gained 0.6% and are now higher by 2.2% this week. Residential mREITs rose 0.2% to push their weekly gains to 1.4%. Sachem Capital (SACH) was among the leaders after holding its dividend rate steady at $0.12/share quarterly, representing a forward yield of 8.53%. This afternoon, Broadmark Realty (BRMK) declared a $0.07/share monthly dividend, also in line with its previous rate, representing a yield 8.35%. The average residential mortgage REIT now pays a dividend yield of 8.45% while the average commercial mortgage REIT pays a dividend yield of 6.66%.

Economic Data This Week

The busy slate of economic data concludes on Friday with Retail Sales data for September which is expected to show a moderation in spending and we'll get the first look at October Consumer Sentiment data following a historic plunge last month. 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 on Saturday morning.

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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.

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