Editor’s Note: Welcome to the September REIT Sheet. This month’s issue includes my quarterly REIT ratings table, featuring my latest advice on 85 individual REITs as well as risk ratings, earnings and guidance analysis and a wealth of other information. Top fresh money buys are AvalonBay Communities (NYSE: AVB) for the more conservative and NNN REIT (NYSE: NNN) for the more aggressive.

Don’t forget to mark your calendar for Tuesday September 26 starting at 2 pm, the time of our next live webchat. It’s your best opportunity to ask about all things REITs.

More than halfway through the month of September, the S&P 500 Real Estate Investment Trusts Sector Index is once again slightly in the black for 2023. The dividend stock benchmark iShares Select Dividend ETF’s (NYSE: DVY) is still in the red -4.27 percent. And the other widely watched dividend stocks index—the Dow Jones Utility Average—is down -5.21 percent.

Our diversified and yield-focused Recommended REITs list is still lagging big REIT indexes so far in 2023 with a -3.89 percent year to date loss.

As I pointed out last month, that’s for two main reasons. One, I’ve been avoiding REIT sectors that have been following Big Technology stocks higher this year, the clearest examples being data center operators buoyed by hype about artificial intelligence—though swapping CPUs for GPUs will cut both ways with an enormous expense.

Second, we’re focused on yield with a portfolio average of about 5 percent. In contrast, REIT indexes and ETFs are actually providing very little in the way of cash payouts. The popular iShares U.S. Real Estate ETF, for example, yields just 1.87 percent. And quarterly payouts continue to be highly erratic, with the June payment of 39.6 cents following March’s 45 cents and December’s 78.4 cents.

That’s not going to help much if one of your primary objectives is income. But the more important reason to stick with our safety-focused, value and yield seeking approach is it simply works better over a period of time that’s meaningful to investors. Mainly, the REIT Sheet Recommended List is 20 percentage points ahead of the iShares ETF and S&P REIT Index since inception at the end of 2019.

There’s also the fact that this stock market is starting to look a lot like 1999...

Editor’s note: Welcome to part two of your REIT Sheet issue for March/April. This issue of TRS contains the updated version of our entire REIT databank, which currently tracks 85 companies. It’s still in build mode and I welcome reader suggestions for inclusion. I’m also featuring Alexandria REIT (NYSE: ARE) for conservative fresh money and Simon Property Group (NYSE: SPG) for the more aggressive.–RC

The S&P 500 Real Estate Sector Index got out of the gate quickly in 2023, closing February 2 with a year-to-date
gain of 13.11 percent. That wasn’t nearly enough to reverse the Index’s 2022 loss of -26 percent including dividends paid. Nor was it enough to move us out of the cautious stance in which we ended last year.

As it’s turned out, REITs’ surge was largely a false breakout. Since early February, the index has dropped a little over -10 percent, cutting its year-to-date gain to a little over 1 percent. And as our table “Top and Bottom Performing REITs in Q1 2023” highlights, quite a few REITs have done far worse.

In the most recent REIT Sheet update, I stated the view that despite being still solid on the inside, even the highest-quality REITs would likely head lower in an overall stock market slide. We still want to own them. But we also want to stay cautious with fresh money.

I’m going to repeat that advice here. The Federal Reserve appears to have at least temporarily quelled what at one time appeared to be a budding banking crisis—largely because the Biden Administration has demonstrated that it will act to bail out any financial institution it deems would present systemic risk by failing.

But so long as the Fed continues squeezing the economy by driving up interest rates, they’re going to expose weak points. And in the meantime, they’re going to depress investment by driving up the cost of money for all but the best placed individuals and corporations.

As I’ve also pointed out, the central bank crimping investment now all but assures inflation will be higher than ever when it eventually reverses course. And that will be a major upside driver for our favorite REITs, since inflation while the economy is growing pushes up the value of property and rents…