REITs Are Cheap vs. S&P 500

REITs (light green below) still look interesting vs. the broader market, which has been on an epic run since Q1, largely lead by the largest 7 tech stocks.

REITs had a nice bounce since the Federal Reserve meeting, but there are still a lot of 4-6% dividend yielding REITs available.

It has historically paid off to lock in those long-term dividend rates for high-quality REITs. This is especially true of REITs that can reliably grow their dividend.

Because a 5% dividend from a REIT with a strong acquisition pipeline (and solid capital allocation track record) should become a 10%+ yield on cost dividend for long-term shareholders.

Private Real Estate

We obviously keep a close eye on private real estate markets to inform our REIT investments.

Below is un-leveraged (without debt) expected real estate returns vs. corporate bonds. The two tend to go hand in hand with about a 2% spread (with real estate returns a bit higher than corporate bonds).

This makes sense as real estate equity is riskier than debt and should command a premium.

While not an exact science, this measure suggests that private real estate is about fairly priced after the recent declines the last six months.

All bets remain of for office, but apartment, industrial and retail values seems to be stabilizing.

Thank you,

REIT Dividends