The total returns of listed U.S. equity real estate investment trusts were approximately four times those of the broader stock market in 2011, according to the National Association of Real Estate Investment Trusts. REITs are securities that sell like stocks and invest in real estate directly through properties or mortgages.
NAREIT said the total return of the FTSE (Financial Times Stock Exchange) NAREIT All Equity REITs Index was up 8.28 percent for the year, and the FTSE NAREIT All REITs Index, which includes both equity and mortgage REITs, was up 7.28 percent, compared with a 2.11 percent gain for the S&P 500.
The more than 8 percent gain for equity REITs in 2011 came on top of a 27.95 percent gain in 2010 and a 27.99 percent increase in 2009—years in which the S&P 500 gained 15.06 percent and 26.46 percent, respectively. Equity REITs outperformed the S&P 500 for the past 1-, 3-, 10-, 15-, 20-, 25-, 30-, and 35-year periods, according to NAREIT.
Dividends Boost Performance
Much of REITs’ performance advantage has come from the stocks’ dividend payouts, since almost all of a REIT’s taxable income is paid to shareholders as dividends. The FTSE NAREIT All Equity REITs Index’s 8.28 percent total return in 2011 included a share price return of 4.32 percent, and the FTSE NAREIT All REITs Index’s 7.28 percent total return included a share-price return of 2.37 percent.
The dividend yield of the FTSE NAREIT All Equity REITs Index at December 30, 2011, was 3.82 percent, and the dividend yield of the FTSE NAREIT All REITs Index was 4.83 percent, compared to 2.22 percent for the S&P 500.
“The strong, continuing income stream from REITs is an important component of the appeal of REIT shares for investors,” said NAREIT President and CEO Steven A. Wechsler. “REIT dividends boost an investment portfolio’s performance in good times and help insulate it from downside shocks in turbulent market conditions,” he said.
REITs Set Capital Record
REITs raised a record amount of capital in the public markets in 2011, including a record amount of equity.
REITs raised $51.3 billion in public equity and debt in 2011, more than the $49 billion raised in the previous record year of 2006. Additionally, in spite of 2011’s volatile stock market, $37.5 billion of the capital raised in the year was in public equity, compared with $22 billion in 2006 and $32.7 billion in 1997, the prior record year for REIT equity offerings.
Source: National Association of Real Estate Investment Trusts