Rising interest rates have an affect on all asset classes
throughout the market, however the magnitude will vary
Sectors that generally distribute above-average income via
dividends will be hurt more during a rising interest rate
The U.S. real estate investment trust (REIT) sector has long
been an area for investors to both gain access to the property
market as well as regular income. After a strong start to the
year the sector has been struggling and is now greatly lagging
the S&P 500.
The heavily traded iShares Dow Jones U.S. Real Estate Index
) is only up two percent this year and is 13 percent below the
2013 high. The return does not include the quarterly dividend
that currently stands at a yield of 3.93 percent.
REIT ETFs Outperforming
Not all REIT ETFs are created equal based on where they invest
their money and in what types of properties. For example, the
PowerShares KBW Premium Yield Equity REIT ETF (NYSE:
) is up 10.7 percent in 2013 and it offers a yield of 5.1
percent. The ETF focuses on approximately 24 to 40 small-cap and
mid-cap REITs that are weighted to the holdings with the highest
dividend yield. The focus on the smaller REITs combined with
higher dividends has been a factor in why KBWY has been able to
Another outperformer is the iShares Europe Developed Real
Estate ETF (NYSE:
), which is up 10.4 percent this year. The ETF recently hit a
multi-year high before pulling back to begin the month of
November. The ETF concentrates solely on European companies with
the U.K. and France making up 65 percent of the allocation. The
current dividend yield is 3.0 percent.
The PowerShares Active U.S. Real Estate ETF (NYSE:
)is an actively managed ETF that bases it portfolio on
statistical and quantitative metrics. Year-to-date the ETF is up
5.6 percent and it pays a 2.7 percent dividend yield. The
portfolio is rebalanced every month to meet the proprietary
criteria. The expense ratio is higher than most of its peers at
Investors looking to continue to have exposure to the REIT
sector should think outside the box and veer from the typical
REIT ETF. Whether it be small-cap stocks or international or an
actively traded ETF, it appears the opportunities lie in the
niche and often overlooked REIT ETFs.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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