Many investment experts recommend real estate investment trusts (REITs), as they offer bountiful dividends and an opportunity for capital gains if real estate can continue its nascent recovery.
REITs on average yield about 4.3 percent, far above the 1.53 percent yield for 10-year Treasurys.
And the Federal Reserve’s low interest-rate policy is helping REITs directly by boosting the value of their properties, Steven Brown, senior portfolio manager at American Century Investments, tells Bloomberg.
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The total return for the FTSE NAREIT Index of REITs has exceeded that of the Standard & Poor’s 500 Index for the past three years and for 2012 to date. The REIT index has enjoyed a 16.9 percent return so far this year.
“You’ve got a lot of people who need income,” Allan Flader, a financial adviser at RBC Wealth Management, tells The New York Times. “REITs are in good financial shape, and they have a lot of opportunities to pick up buildings on the cheap.”
As for signs of progress in the real estate market, existing home sales are on the rise, as are prices of many commercial properties.
To be sure, REITs have come a long way over the past 3 ½ years, raising some concern about their valuations.
“They are trading at rich prices. They’re not by any stretch inexpensive by historical standards,” Flader says.
But experts say some REITs still offer a good value.
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