REIT motif: Property trusts still whipping stocks

Despite mixed signals coming from the real estate sector, real estate investment trusts continue to attract investors. The popularity makes sense, too, considering that REITs are still outperforming the broader equity markets. For the three-month period through June 30 the FTSE NAREIT All REITs Index gained 2.9%, according to a report put out on Thursday by the National Association of Real Estate Investment Trusts. That gain compares with a 1% gain by the S&P 500. In fact, through the first six months of the year, the REIT index far outperformed large-caps, gaining 9.9%, while the S&P was up 6%. Over the 12-month period through June 30, the REIT index gained 32.9%, compared with a 30.7% gain for the S&P 500. REITs also continued to reward income-seeking investors by generating a cash dividend yield of 4.3% during the first half of the year, or more than double the dividend yield of companies in the S&P benchmark. (Click on the following link to see a list of the top 50 REITs) “The consistently strong REIT dividend is a critical driver of REITs' total-return performance,” said Steven Wechsler, NAREIT's president and chief executive. “Over longer holding periods, dividends have accounted for more than 60% of the total returns to REIT shareholders,” he added. “Their proven ability to provide reliable income has made REITs a key element of the investment strategies of both younger investors who are building portfolios, and retirees who are relying on them to meet their expenses.” The timber and self-storage categories have been the strongest recent performers in the space, with timber REITs up 16.7% and self-storage up 15.1% over the first half of the year. Among the larger REIT market sectors, apartments led with a 14.1% total return in the first half of the year, followed by the office sector, which was up 12.5%. Capital raising for REITs is on pace to surpass the $49 billion peak year of 2006, which included 199 secondary offerings and five initial public offerings. Through the first half of this year, REITs raised $36 billion through 108 secondary offerings and five IPOs.