REITs are popular with many income investors for the dividend income stream the REIT model necessitates, and also, with individuals who want exposure to real estate as an asset class that might appreciate after any coming inflation.
This is an analysis of the several strip-, mini- and/or open-mall REITs. REITs must distribute at least 90% of their taxable income in order to eliminate the need to pay income tax at the corporate level. As a result, most REITs offer an above-average yield when compared to equities. Of course, some have below-average yields, and where there is a loss, rather than income, there should be no yield.
Below are the current yields, as well as the 1-month and 2011-to-date performance rates, for seven REITs within these businesses:
Developers Diversified Realty Corp. (NYSE:DDR)
- Yield: 1.3%
- 1-Month performance: -28.01%
- 2011-to-date performance: -22.64%
Equity One Inc. (NYSE:EQY)
- Yield: 4.9%
- 1-Month performance: -13.52%
- 2011-to-date performance: -5.34%
Federal Realty Investment Trust (NYSE:FRT)
- Yield: 3.2%
- 1-Month performance: -3.18%
- 2011-to-date performance: 10.86%
Kimco Realty Corporation (NYSE:KIM)
- Yield: 4.2%
- 1-Month performance: -17.17%
- 2011-to-date performance: -7.98%
Regency Centers Corporation (NYSE:REG)
- Yield: 4.6%
- 1-Month performance: -14.92%
- 2011-to-date performance: -6.08%
Tanger Factory Outlet Centers Inc. (NYSE:SKT)
- Yield: 3%
- 1-Month performance: -7.12%
- 2011-to-date performance: 3.79%
Weingarten Realty Investors (NYSE:WRI)
- Yield: 4.8%
- 1-Month performance: -13.26%
- 2011-to-date performance: -3.2%
Retail REITs are generally sensitive to economic cycles and the strength of the American consumer, as the value of mall space is directly connected to the level of public consumption. A continued economic downturn should weaken the demand for mall property space, and lower the amount of commerce completed within each square foot. Conversely, improving economics should benefit the business.
Much of the calculation to derive growth within retail property management and leasing depends upon presumptions about each REIT's adjusted funds from operations (AFFO), or cash available for distribution. AFFO is usually calculated by deducting straight-lined rent (average rent over the lifetime of a lease) and reserves for costs that cannot be directly recovered from tenants, such as general maintenance. Fund analysis is always subject to change based upon future development and other events, including actions by tenants.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: This article is intended to be informative, and should not be construed as personalized advice, as it does not take into account your specific situation or objectives.