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High-yielding Reits continue to best broader markets in 2013

Thu, 14/02/2013 - 16:01

Shares of high yielding mortgage Reits have performed well this earnings season.

The iShares FTSE NAREIT Mortgage Reits Index ETF (REM) has gained nearly 10 per cent year-to-date, outperforming the Dow Jones Industrial Average gain of 6.5 per cent over the same period.

In a low interest rate environment investors have flocked to the high yielding dividend of Reits, as many companies offer yields in excess of 10 per cent. Reits are not taxed at the corporate level but in return are required to distribute at least 90 per cent of their taxable income as dividends to investors. A steadily improving US housing market helped boost investors' appetite for Reits.

The Dow Jones Equity All Reits Index, which tracks the performance of all the publicly traded US Reits, gained nearly 20 per cent in 2012, making it the fourth consecutive year Reits have bested the broader Standard & Poor's 500 Index.

"Despite vacillation in stock markets, investors haven't lost their appetite for a steady diet of real estate," says Jeff Tjornehoj, a Lipper analyst.

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