9 Stocks with Dividend Yields Over 4% in a Sector That Often Beats the Broader Market
REITs outperformed the S&P 500 last year and so far in 2019
Real estate investment trusts, or REITs, are usually considered income investments, so some investors panic and sell them when interest rates are rising. But the Federal Reserve’s recent change in policy should put that fear to rest.
Meanwhile, you can see that REITs have performed very well compared to the broader stock market in the long run. We list S&P 500 REITs, sorted by yield, below.
We pointed out in August that a knee-jerk reaction to avoid REITs when interest rates are rising isn’t supported by performance. A rising-rate environment is typically one that also features significant economic growth, which means a REITs’ rental income and earnings will rise. This tends to offset negative price action from rising rates.
The Fed’s recent change in direction may have eliminated the usual fear of interest-rate increases, at least for now.
And the silver lining is that REITs as a group have measured up well against the broader stock market over long periods. Here’s how the S&P 500 REIT industry group’s total returns (with reinvested dividends) have compared to the entire S&P 500 SPX over various periods. First, we’ll show total returns and then average annual returns.
Total returns through Feb. 15, except as indicated:
|S&P 500 REITs||S&P 500|
You can see that the 10-year figures are distorted because in early 2009, we were close to the market bottom that followed the deep declines experienced during the credit crisis.
It might be more useful to compare average annual total returns over long periods:
|S&P 500 REITs||S&P 500|
The 15-year figures are particularly interesting. Despite the 2008-2009 crisis, the REITs have performed better than the S&P 500, even though the full index is so heavily weighted to large tech stocks, such as Facebook FB, Apple AAPL, Amazon AMZN, Netflix NFLX, and Google holding company Alphabet GOOG, GOOGL.
S&P 500 REITs: yields and returns
While we have compared total returns with dividends reinvested, you won’t be reinvesting if you are buying REIT shares for income.
It is very important to consider your investment objective. Even if you are not investing in REITs for income, they can help you diversify your portfolio. You should also consider a REIT’s particular specialty and growth prospects when deciding whether to invest.
Here are all 32 REITs in the S&P 500, sorted by dividend yield:
|Real estate investment trust||Ticker||Primary investing activity||Dividend yield – current||Average total return – 15 years|
|Iron Mountain Inc.||IRM||Document and data storage facilities||6.96%||8.6%|
|Macerich Co.||MAC||Commercial properties||6.87%||4.6%|
|Kimco Realty Corp.||KIM||Shopping centers||6.31%||2.9%|
|Ventas Inc.||VTM||Senior housing and health care properties||4.86%||12.4%|
|HCP Inc.||HCP||Senior housing and health care properties||4.80%||7.2%|
|Welltower Inc.||WELL||Senior housing and health care properties||4.48%||11.3%|
|Simon Property Group Inc.||SPG||Shopping malls||4.36%||13.2%|
|Host Hotels & Resorts Inc.||HST||Hotels||4.29%||5.8%|
|Realty Income Corp.||O||Diverse commercial properties||3.86%||14.2%|
|Public Storage||PSA||Self-storage facilities||3.85%||13.8%|
|Vornado Realty Trust||VNO||Office buildings in New York, Chicago and San Francisco||3.84%||7.3%|
|Crown Castle International Corp||CCI||Cellular towers||3.75%||17.9%|
|SL Green Realty Corp.||SLG||Commercial properties in Manhattan, New York||3.71%||7.9%|
|Mid-America Apartment Communities Inc.||MAA||Apartment communities||3.69%||12.5%|
|Regency Centers Corp.||REG||Shopping centers||3.53%||7.4%|
|Digital Realty Trust Inc.||DLR||Data centers||3.51%||N/A|
|Extra Space Storage Inc.||EXR||Self-storage facilities||3.45%||N/A|
|Apartment Investment and Management Co. Class A||AIV||Apartment communities||3.14%||9.9%|
|AvalonBay Communities Inc.||AVB||Apartment communities||3.10%||13.6%|
|Federal Realty Investment Trust||FRT||Retail properties||3.01%||11.7%|
|Equity Residential||EQR||Rental apartment properties||2.95%||11.7%|
|UDR Inc.||UDR||Multifamily residential properties||2.89%||11.3%|
|Duke Realty Corp.||DRE||Industrial properties||2.89%||5.1%|
|Alexandria Real Estate Equities Inc.||ARE||Life sciences and technology office campuses||2.88%||8.9%|
|Boston Properties Inc.||BXP||Office properties||2.84%||11.2%|
|Prologis Inc.||PLD||Logistics and distribution facilities||2.70%||8.6%|
|Essex Property Trust Inc.||ESS||Multifamily residential properties||2.67%||14.4%|
|Equinix Inc.||EQIX||Data centers||2.34%||20.6%|
|American Tower Corp.||AMT||Communications infrastructure||1.89%||20.7%|
|CBRE Group Inc. Class A||CBRE||Services to the commercial real-estate industry||0.00%||N/A|
|SBA Communications Corp. Class A||SBAC||Wireless communications infrastructure||0.00%||29.3%|
So a high dividend yield can be a very good thing if income is your objective. But as you can see, the best 15-year performer on the — SBA Communications Corp. SBAC — doesn’t even pay a dividend.