REITs: in Review 2017

REITs: we examine the Top 25 within the context of the Fed’s most recent interest rate hike.

Although REITs have weathered the rising trend in interest rates (which started in Q4 2014) quite well, their returns have generally underperformed the market relative to the S&P 500. To illustrate the industry’s performance in this environment Economatica chose the Top 25 REITs ranked by Total Assets and examined several key metrics.

As can be observed from the 3-year table below the median returns for this group relative to the S&P 500 are negative for each period: YTD -11.26%, 1 Year -8.55%, 2 Year -4.13%, and 3 Year -10.88%. Clearly, when considered as a group, these 25 companies have underperformed the market since Q4 2014 and may give investors pause.

On an individual basis there are a handful of companies which have performed well despite the pressures of interest rates and other factors. The companies with the highest YTD returns relative to the S&P 500 are American Tower Corporation (16.07%), Crown Castle International (11.10%), and Annaly Capital Management (10.25%). More important are those companies which have outperformed the market since interest rates began to move upwards three years ago.

Taking first place is Equinix with a 3 year cumulative return relative to the S&P 500 of 66.43%. New Residential Investment Corporation takes second place with a return of 51.45% and Digital Realty Trust places third with 46.11%.

REITs

Given this underperformance over the past 3 years there is still no fundamental reason to panic.

The Annual Dividend Yield and Dividend Paid per Share have remained stable and consistent throughout this period.


The indicators Return on Assets (ROA) and EBIT/Net Interest Expense, two key evaluation metrics for REITs, have also improved during this period.

Now, although REITs have historically produced a track record of strong performance, investors still have to examine the companies themselves and compare their valuation metrics against their peers.

You can use the Economatica system to generate your own observations. Ask us for a free trial.

Subscribe to our newsletter and receive our
exclusive content
as soon as it comes out

RELATED STUDIES

Software stands out among best performing Sectors of 2018.

We explore year-to-date sector returns of the market and identify the hottest sectors. Using the...

Learn more

July 16, 2018 | By Economatica

IPOs continue to impress in 1st half of 2018

In this edition of Value Reports we examined the IPO market in the 1st half...

Learn more

July 10, 2018 | By Economatica

2018 Mid-Year Review. Who are the winners so far?

In this edition of Value Reports we identify and examine the Top 10 Winners of...

Learn more

July 2, 2018 | By Economatica