Thu 20 Jul 2006
The Bernanke rally yesterday seems to have given REITs a bit of a push (today they gave back a little). They’re now within spitting distance of the highs set back in March. Breaking above the recent high would be a bullish technical indicator, and there are potential fundamental influences at work as well (inflation, rising rents, etc.).
For reference, I look at the Dow Jones REIT Index (DJR), the Real Estate iShares (IYR), and the ING Clarion Global Real Estate Income Fund (IGR) to monitor the REITs broadly. The first two are basically broad indexes, where IGR is a closed-end fund and currently trades at an 8% discount to NAV.
It looks like the average yield for DJR is about 4.8% (if I calculated it correctly), where IYR is yielding 3.5% and IGR is yielding 7.5%. REITs as an income play and as an inflation play may still be alive.
If you’re worried about a wider real estate slowdown, make sure you pick and choose the right Residential REITs, Retail, or Development REITs. For example, in the Residentail category, apartments could/should do well if potential homebuyers flee back to apartment living.
On the up side, I noticed the Healthcare REITs are sporting quite nice dividends – CSA @ 7.4%, HCP @ 6.4%, HCN @ 7.2%, HR @ 8.1%, LTC @ 6.7%, NHI @ 7.7%, NHR @ 7.2%, NHP @ 6.7%, OHI @ 7.2%, UHT @ 7.1%, VTR @ 4.6%, WRS @ 6.5%.
Definately worth further investigation…