Global X SuperDividend REIT ETF: It's Not All REIT

Summary

• Global X SuperDividend REIT ETF invests in global REITs. The ETF is currently passing through a rough patch because of COVID-19's impact on the commercial real estate sector.
• The ETF's forward dividend yield of about 7% does not seem attractive enough, considering that its dividend payouts have been falling since 2018.
• I am neutral on the ETF because there are other less risky and higher-yield options available out there. I would avoid the fund, and if already invested, I would exit.
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The Global X SuperDividend REIT ETF (NASDAQ:SRET), which seeks to provide income and price gains to its investors by investing in 30 high-yielding global REITs, was cruising in steady waters until COVID-19 reared its ugly head, smashed into the commercial property market, and disrupted the sector for a long time to come.

The good news is that after crashing from a high of about $16 in February 2020 to a low of about $4.5 in March 2020, SRET has retraced 50% of its fall and is trading at about $9 as of February 19, 2021. Volatility has reduced and investors can expect SRET's price to move in a narrow range until the economy recovers fully.

Image Source: Trading View

Here is my analysis on whether SRET qualifies as an investment for income investors:

Long-Term Impact of COVID-19 on REITs

As per the Fall 2020 Report of the National Association of Real Estate Investment Trusts (NAREIT), the only REITs that delivered positive returns were data center, industrial, self-storage, and infrastructure REITs. The rest - residential, healthcare, commercial and home financing, office, hotel, retail, etc., REITs - delivered negative returns.

Image Source: NAREIT

NAREIT says that the sector will recover entirely only after the economy stabilizes. That seems to be a couple of years away because otherwise, the Fed wouldn't have pledged to keep interest rates near-zero until 2022 end.

NAREIT estimates that retail real estate will be impacted by e-commerce and that shopping patterns will transition to buy-online-and-pick-up-at-physical-store kind of shopping. Hotels and resorts can witness a full recovery only after the economy stabilizes. The organization is unclear about how office demand will shape up, given the economic hole and the WFH culture gathering pace.

I believe that if the hybrid working model (home-office) becomes the new normal, commercial real estate will suffer badly.

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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