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Retail real estate investment trusts and related exchange traded funds will provide investors with attractive dividends as the economy improves and retail sales grow, say S&P analysts.

S&P Capital IQ holds a "Marketweight" ranking on the iShares FTSE NAREIT Retail Index Fund (NYSEARCA:RTL), which follows a group of retail REITs traded on the FTSE NAREIT Retail Capped Index. The fund holds companies, like Simon Property Group (NYSE:SPG), CBL & Associates Properties (NYSE:CBL) and Macerich (NYSE:MAC), that have experienced rising occupancy levels and rent growth. The ETF has an expense ratio of 0.48% and a 12-month yield of 3.35%.

"S&P Capital IQ believes retailer sentiment is buoyant, with sales rising, retailers expanding and many retail REITs trading at elevated levels driven by improving operating results and relatively rich dividend yields," Robert McMillan, S&P Capital IQ Equity Analyst, wrote in a research note. "We anticipate that shopping center REITs will use their improving cash flows to increase dividends over the course of 2012."

REITs are securities that trade like stocks on major exchanges. The investments hold physical properties that generate revenue from rent payments. To qualify for favorable tax treatments, the REIT will distribute a hefty portion of its revenue as dividends to investors.

S&P calculates that real GDP will expand 2.1% year-over-year in 2012, compared to the 1.7% growth in 2011. Analysts also project growth in personal expenditures to rise 2%.

Additionally, S&P notes that lower retailer bankruptcies and reduced store closures is helping the retail REITs space. According to CBRE Econometric Advisors' fourth quarter 2011 outlook, they estimate the retail space will expand 29.4 million to 37.4 million square feet in 2012 and 2013, respectively, compared to a drop of 3.9 million square feet in 2010 and an increase of 2.1 million square feet for 2011.

However, "the economic downturn triggered a sharp decline in shipping center construction that we see persisting in the near term … which should help exert upward pressure on occupancy levels and, ultimately, rents," S&P cautioned.

iShares FTSE NAREIT Retail Index Fund

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Max Chen contributed to this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.