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  • Alex Pettee, CFA

Stocks Rebound • REIT Dividend Hikes • Earnings Analysis

  • U.S. equity markets rallied Friday- pushing the major benchmarks to the second week of gains- as a mixed slate of earnings reports and lukewarm economic data raised hopes for a "soft landing."

  • Finishing the week with gains of nearly 4%, the S&P 500 advanced 2.5% today while the tech-heavy Nasdaq 100 rebounded with 3.1% gains to end the week with 2% gains.

  • Real estate equities were upside leaders throughout the week with Equity REITs gaining 2.2% today- and over 6% on the week while Mortgage REITs rallied 3.3% today- and 10% this week.

  • Another day, another handful of REIT dividend hikes. Mall REIT Macerich (MAC) surged nearly 8% after hiking its quarterly dividend by 13% to $0.17/share. We've now seen 120 REITs raise their dividend this year - matching the full-year record-high total from 2021.

  • CubeSmart (CUBE) - which we own in the REIT Dividend Growth Portfolio - rallied more than 6% today after it boosted its full-year FFO growth target to 19.0% - up 100 basis points from last quarter - and its NOI growth target to 16.0% - up 50 basis points.

 

Income Builder Daily Recap

U.S. equity markets rallied Friday - pushing the major benchmarks to the second week of solid gains - as a mixed slate of corporate earnings reports and lukewarm economic data raised hopes of a "soft landing." Finishing the week with gains of nearly 4%, the S&P 500 advanced 2.5% today while the tech-heavy Nasdaq 100 rebounded with 3.1% gains to end the week with gains of roughly 2%. The Mid-Cap 400 and Small-Cap 600 each advanced more than 5% on the week. Real estate equities were upside leaders throughout the week driven by a solid slate of earnings results and lifted by a retreat in longer-term interest rates. The Equity REIT Index finished higher by 2.2% today - and more than 6% on the week while the Mortgage REIT Index gained 3.3% today to push its weekly gains to over 10%.

Stabilization in long-term interest rates amid evident signs of cooling inflationary pressure in corporate earnings results and in soft economic data this week sparked a bid across both U.S. equities and bond markets. Cooler-than-expected Core PCE Inflation data - the Fed's most closely-watched inflation gauge - along with weak Pending Home Sales data and a downbeat prognosis on U.S. consumer spending trends from Amazon (AMZN) kept downward pressure on the 10-Year Treasury Yield today, which closed the week at 4.01% - well below its recent intra-day highs of 4.30% last 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.

Real Estate Daily Recap

Best & Worst Performance Today Across the REIT Sector

Today we published REIT Earnings Halftime Report. At the halfway point of earnings season, of the 41 REITs that have provided full-year Funds From Operations ("FFO") guidance, 28 REITs (67%) raised their outlook while just 4 REITs (10%) have lowered their outlook. Solid results from REITs come amid an otherwise disappointing earnings season for the broader equity market as, per FactSet, just 48% of S&P 500 companies have boosted their outlook. Upside standouts thus far have been Industrial, Shopping Center, and Apartment REITs. Sunbelt-focused office REITs have also surprised to the upside while the initial batch of results from Hotel and Healthcare REITs have been solid. While so far avoiding the downdraft from the "tech wreck" this earnings season, currency headwinds dragged on technology REITs.

Storage: CubeSmart (CUBE) - which we own in the REIT Dividend Growth Portfolio - rallied more than 6% today after it boosted its full-year FFO growth target to 19.0% - up 100 basis points from last quarter - and its NOI growth target to 16.0% - up 50 basis points. The first storage REIT to report results this earnings season, CUBE reported that it "continues to see solid demand across the portfolio as we returned to more normalized seasonal trends during the quarter." While the rate-driven slowdown in housing market activity is expected to temper incremental storage demand, we discussed our recent Storage REIT report that PPI data and interim REIT updates have indicated strong demand trends continued deep into the third-quarter.

Another day, another handful of REIT dividend hikes. Mall REIT Macerich (MAC) surged nearly 8% after hiking its quarterly dividend by 13% to $0.17/share. Community Healthcare (CHCT) advanced nearly 3% after raising its quarterly dividend by another 1%. We've now seen 120 REITs raise their dividend this year - matching the full-year record-high total from 2021.


Mortgage REIT Daily Recap

Per the REIT Rankings Tracker available to Income Builder subscribers, mortgage REITs continued to rally today as earnings results thus far have been significantly better than expected. PennyMac (PMT) surged more than 10% today after reporting that its Book Value Per Share ("BVPS") was lower by just 2.5% in the third quarter - the most muted decline among residential mREITs to report results thus far. Redwood Trust (RWT) advanced more than 6% after reporting a similarly better-than-expected report with a BVPS decline of just 5.6% in Q3. Ladder Capital (LADR) gained nearly 3% after reporting in-line results while Orchid Island (ORC) gained 2% after confirming its preliminary report that its BVPS dipped more than 20% in Q3. The earnings calendar heats up in the week ahead with results from two dozen mREITs.

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.