Data Confirms Strong First Half Of 2012 For REIT Industry

11985_dollarmaze Data Confirms Strong First Half Of 2012 For REIT Industry The U.S. real estate investment trust (REIT) industry outperformed the broader equity market during the first half of this year, according to data released by Zacks Equity Research.

Zacks reports that the FTSE NAREIT All Equity REIT Index had total returns of 16.11% as of July 2. In comparison, the NASDAQ Composite had returns of 13.28% for the same period, while the S&P 500 Index registered 8.58% in returns.

‘Investors looking for high dividend yields have historically favored the REIT sector,’ says Zacks. ‘Solid dividend payouts are arguably the biggest enticement for REIT investors as U.S. law requires REITs to distribute 90 percent of their annual taxable income in the form of dividends to shareholders. The dividend yield for the FTSE NAREIT All Equity REIT Index as of July 2 was 3.25 percent, compared to 1.58 percent for the 10-year U.S. Treasury Note.’

Zacks also notes that REITs took on less debt than private real estate investors between 2007 and 2009, and many sold during a market peak period when private equity investors were still buying. Furthermore, REITs have been able to pay discounted prices for properties being sold by highly leveraged investors.

While Zacks says the outlook for the second half of the year is positive, several factors may created problems for the REIT industry.

‘As it is a presidential election year, chances are high that the U.S. policymakers will refrain from making any radical changes on key issues,’ Zacks warns. ‘With political uncertainty persisting until at least the elections are over, investors might play a 'wait and see' game before committing on better investment opportunities. This could, in turn, put a ceiling on equity returns in the latter half of 2012.

‘Furthermore,’ Zacks continues, ‘the strategic move to focus on austerity measures among European countries could impede regional economic growth, leading to a dearth of investor confidence in the European financial and fiscal system. In addition, economic growth in emerging markets, particularly the BRIC countries, is expected to be lesser than in recent years, driven by a relative weakness in the developed world and related uncertainties in the global business climate. All these factors could cumulatively contribute to an equity market headwind in the remainder of 2012.’


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