In a further sign that real estate investments are on the upswing, NAREIT says that real estate investment trusts (REITs) outperformed the broader equity markets in July. Most sectors have now chalked up seven months in a row of mostly double-digit returns.
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Reportedly, the FTSE NAREIT ALL REITS Index returned 2.3% and the FTSE NAREIT ALL Equity REITS Index 2.17% in July against the S&P’s 1.39%. The first seven months of 2012 showed the FTSE NAREIT ALL REITs Index up 18.08%, the FTSE NAREIT ALL Equity REITs Index up 17.4%, and the S&P 500 up 11.01%.
The REITs indexes also beat S&P 500 returns over the most recent 12-month period. The retail REIT sector gave the highest total return of 23.57% with regional malls leading the way. Industrial REITs were up 16.54%, office REITs up 13.79%, and apartments up 13.3%.
Healthcare REITs were up 19.81% and timber REITs were up 18.31%. Retail investors looking for income received dividend yields of 4.16% on the FTSE NAREIT ALL REITS Index through July 31 and of 3.23% on the FTSE NAREIT ALL Equity REITS Index.
REITs may be a reasonable income producing alternative for clients who can manage the risks present in the different REIT sectors. Combining income
sources from different high-risk investments such as REITs, junk bonds, and emerging markets bonds may further diversify risk over an income producing portfolio.