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Why REITs Will Outperform In 2019 - And Our Top Buy, Brookfield Property

Feb. 10, 2019 9:02 AM ETSPY, VNQ, BPYU, BPY169 Comments


  • REITs have historically been one of the very best asset classes for high total returns with substantial income and only moderate risk relative to other asset classes.
  • We believe that this track record of outperformance is the result of recurrent factors that are still here and expected to result in further outperformance in the long run.
  • This is also supported by the strong fundamentals and discounted valuations. Moreover, we believe that the latest change in market leadership is set to improve market sentiment.
  • REITs have proven time and time again that periods of underperformance are shortly followed by further outperformance. Will “this time be different”?
  • We reveal in this report on Top Buy in the Property REIT sector today.
  • Looking for a portfolio of ideas like this one? Members of High Dividend Opportunities get exclusive access to our model portfolio. Start your free trial today »

Co-produced with Jussi Askola and PendragonY for High Dividend Opportunities

It is well-known to the investment community that REITs have historically been one of the very best asset classes to invest in your hard-earned money. In the past 20 years, REITs have literally crushed the returns of every other sector with annual returns exceeding 12.5%:


If you remove the last 3 years of underperformance, the return differential is even greater, and the compounding effect works wonders. In the 10 years from 1997 to 2016, the Vanguard Property REIT ETF (VNQ) generated up to 4x higher total returns than the S&P 500 (SPY) and this is despite suffering the world’s sharpest real estate crash in 2008-2009:



Interestingly, REITs achieved these phenomenal results despite being less risky investments than most other stocks. This lower risk is the result of REIT’s underlying assets and the structure of their legal entity:

  • REITs represent diversified portfolios of income-producing properties with long lease agreements and automatic rent increases to protect against inflation.
  • Therefore, the assets are infrastructure-like and the cash flow is often more similar to a bond than an equity investment.
  • REITs are inherently less risky investments and tend to be less volatile because the underlying value of properties acts as strong support against price fluctuations. At the end of the day, Property REITs own real estate properties, and real estate prices seldom fluctuate much, and in the long term, prices do appreciate.
  • REITs pay higher dividends and are less reliant on more questionable growth to generate returns. REITs must by law pay out at least 90% of their taxable income – giving control of the cash flow over to the shareholders.

Whenever there is an opportunity to generate higher total returns with lesser potential risk, at High Dividend Opportunities it is

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This article was written by

Rida Morwa profile picture
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I am a former Investment and Commercial Banker with over 35 years of experience in the field. I have been advising both individuals and institutional clients on high-yield investment strategies since 1991. I am the lead analyst at High Dividend Opportunities, the #1 service on Seeking Alpha for 6 years running.

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