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Deals & Dealmakers

REIT returns outpace S&P 500 through March

Stock exchange-listed Equity REITs significantly outperformed the rest of the equity market in March and the first quarter of 2016, according to the National Association of Real Estate Investment Trusts (NAREIT).

The total return of the FTSE NAREIT All REITs Index, the broadest benchmark of the U.S. REIT market including both Equity and Mortgage REITs, was 9.99 percent in March and 5.86 percent in the first quarter, while the FTSE NAREIT All Equity REITs Index was up 10.17 percent in March and 5.84 percent in the first quarter.

In comparison, the total return of the S&P 500 was 6.78 percent in March and 1.35 percent in the first quarter. The FTSE NAREIT Mortgage REITs Index’s total return was 4.48 percent in March and 1.28 percent in the first quarter.

“REIT share prices, along with those of most other segments of the equity market, faced headwinds in January and early February, but REITs experienced a stronger recovery than the broader equity market in March,” said NAREIT President and CEO Steven A. Wechsler.

Wechsler said REITs’ gains may be due in part to growing investor recognition of the fact that REITs have generated consistently strong operating results and increased dividends for their shareholders. He noted that the listed REIT industry’s total Funds From Operations, Net Operating Income and dividends paid increased in each quarter of 2015 over the same quarter in the prior year.

“Economic growth is continuing to support our industry’s fundamentals and dividend growth,” Wechsler said.

Free Standing Retail REITs, a property segment made up of REITs that lease single-tenant properties, primarily on a triple net lease basis, delivered an 18.69 percent total return in the first quarter of 2016, more than three times the gain of the FTSE NAREIT All Equity REITs Index.

Other property categories that outperformed the index in the quarter were Specialty REITs, up 14.83 percent; Data Centers, up 14.29 percent; Self Storage, up 10.85 percent; Shopping Centers, up 8.00 percent; Manufactured Homes, up 7.70 percent; Industrial, up 6.49 percent; and Lodging/Resorts, which gained 6.09 percent.

Home Financing Mortgage REITs delivered a 7.49 percent total return for the first quarter of the year.

REITs continued to offer strong dividend yields at the end of 2016’s first quarter.

The dividend yield of the FTSE NAREIT All REITs Index was 4.19 percent on March 31, the yield of the FTSE NAREIT All Equity REITs Index was 3.76 percent, and the yield of the FTSE NAREIT Mortgage REITs Index was 11.83 percent. In comparison, the dividend yield of the S&P 500 was 2.15 percent.

Among Equity REITs, seven property sectors and sub-sectors delivered yields that beat the yield of the FTSE NAREIT All Equity REITs Index. The Specialty sector yielded 6.09 percent. Health Care REITs yielded 5.61 percent, the Lodging/Resorts sector yielded 5.31 percent, the Diversified sector yielded 4.72 percent, Free Standing Retail yielded 4.25 percent, and the Industrial sector yielded 3.86 percent. Home Financing Mortgage REITs outpaced the FTSE NAREIT Mortgage REITs Index, delivering a dividend yield of 12.71 percent.

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