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Investors are Reaching for Yield with REITS

By on July 27, 2011

One of the worst asset classes as far as value is concerned appear to be Real Estate Investment Trusts (REITS).  Since the bottom in 2009 REITS have risen over 200%; doubling the performance of equities.  Over the past two years they have returned nearly 100%.   REITS are not far from their all-time highs back in 2007.

Click on the chart for a larger image:


The yield on the Vanguard REIT ETF (VNQ), a good proxy for this group, is currently 3.3%.  While this might appear to be a decent payout in this low rate environment, investors don’t seem to appreciate this generally covers 90% of the profits of this group.  REITS are required to distribute the vast majority of their earnings.

Russ Koesterich, iShares global chief investment strategist, agrees with this assessment in the following video:

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