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  • Alex Pettee, CFA

Stocks Slide • Troop Build-Up • REIT Dividend Hikes

  • U.S. equity markets finished sharply lower Thursday - erasing their gains for the week - amid intensifying geopolitical tensions on the Russia/Ukraine border and downbeat economic data.

  • Finishing near session-lows and pushing the index back to the cusp of correction territory, the S&P 500 dipped 2.1% today while the tech-heavy Nasdaq 100 declined 3.0%.

  • Real estate equities were among the outperformers today amid a busy stretch of REIT earnings reports as the Equity REIT Index declined 1.1% today with 3-of-19 property sectors in positive-territory.

  • Another four REITs hiked their dividends over the last 24 hours: Equinix, Retail Opportunities, Host Hotels, and NexPoint Real Estate. We've now seen 25 REITs hike their dividend this year following a record 130 dividend hikes in 2021.

  • Independence Realty (IRT) rallied after reporting stellar results. Driven by double-digit NOI growth and blended leasing spreads of over 15% in Q4, IRT delivered FFO growth of 15.1% in 2021 as rents continue to soar across essentially all segments of the rental markets.

Income Builder Daily Recap

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U.S. equity markets finished sharply lower Thursday - erasing their gains for the week - amid intensifying geopolitical tensions on the Russia/Ukraine border and downbeat economic data. Finishing near session-lows and pushing the index back to the cusp of correction territory, the S&P 500 dipped 2.1% today while the tech-heavy Nasdaq 100 declined 3.0%. The Small-Cap 600 and Mid-Cap 400 were lower by 1.9% and 2.2%, respectively. Real estate equities were among the outperformers today amid a busy stretch of REIT earnings reports as the Equity REIT Index declined 1.1% today with 3-of-19 property sectors in positive territory while the Mortgage REIT Index slipped 2.3%.

Investors rotated into safe-haven asset classes today after reports of an accelerated Russian troop build-up on the Ukrainian border and on potential signs of softness emerging in economic data as Gold (GLD) rallied 1.4% today while the 10-Year Treasury Yield dipped 7 basis points to 1.97% today, retreating from the highest level since late 2019. Nine of the eleven GICS equity sectors were lower today as the Technology (XLK) and Communications (XLC) sectors remained under pressure while the Consumer Staples (XLP) sector continues to be the outperformer on the week.

Equity REIT Daily Recap

Another four REITs hiked their dividends over the last 24 hours. Equinix (EQIX) declared a $3.10/share quarterly dividend, an 8% increase from its prior dividend of $2.87. Retail Opportunity (ROIC) declared a $0.13/share quarterly dividend, an 18.2% increase from its prior dividend of $0.11. Host Hotels & Resorts (HST) reinstated its dividend at $0.03/share, nearly two years after initially suspending its payout in 2Q20 to conserve cash during the pandemic. NexPoint Real Estate (NREF) declared a $0.50/share quarterly dividend, a 5.3% increase from its prior dividend of $0.475. We've now seen 25 REITs hike their dividend this year following a record 130 dividend hikes in 2021.

Data Center: Equinix (EQIX) - which we hold in the REIT Dividend Growth Portfolio - gained more than 2% today after it reported strong results highlighted by record bookings volume and provided an upbeat outlook for continued high-single-digit FFO growth for 2022. Driven by robust 5% same-store revenue growth, EQIX delivered AFFO growth of 9.5% in 2021 and sees growth of another 7.1% at the midpoint of its 2022 guidance. We'll hear results from Digital Realty (DLR) this afternoon.

Apartment: Independence Realty (IRT) - which we own in the Hoya Capital Housing Index - gained more than 3% today after reporting stellar results. Driven by double-digit NOI growth and blended leasing spreads of over 15% in Q4, IRT delivered FFO growth of 15.1% in 2021 as rents continue to soar across essentially all segments of the rental markets. IRT sees the momentum continuing throughout the year, providing guidance calling for 21.4% FFO growth in 2022 with NOI growth of 11.0% at the midpoint of its initial range.

As discussed in our REIT Earnings Preview: Dividend Hikes And 2022 Outlook, highlights of this afternoon's earnings slate include Tanger Outlets (SKT), Digital Realty (DLR), Ventas (VTR), Park Hotels (PK), and Diamondrock Hospitality (DRH). 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 REIT earnings season.

Mortgage REIT Daily Recap

Per the REIT Rankings Tracker available to Income Builder subscribers, commercial mREITs declined 1.7% today while residential mREITs dipped 2.3%. NexPoint Real Estate (NREF) was among the outperformers after reporting that its Book Value Per Share (BVPS) increased 2% during Q4 and also raised its dividend by 5%. Armour Residential (ARR) slumped after reporting that its BVPS declined 7% in Q4 and was under pressure in early 2022. Chimera (CIM) dipped nearly 5% after reporting that its BVPS declined by 4% in Q4. We'll hear results from Hannon Armstrong (HASI), Invesco Mortgage (IVR), and New York Mortgage (NYMT) this afternoon.

Economic Data This Week

The jam-packed week of earnings reports and economic data kicked off on Tuesday with the Producer Price Index for January, which failed to show any deceleration in inflation after reaching the highest rate on record in December. On Wednesday, we saw Retail Sales data which showed an uptick in January after a disappointing December. The busy slate of housing data kicked off on Wednesday with the Homebuilder Sentiment. On Thursday, we saw Housing Starts and Building Permits. On Friday we'll see Existing Home Sales data which is expected to show continued momentum behind the housing industry despite the recent rise in mortgage rates.

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.