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IYR: Rates Are A Headwind For Real Estate

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Unlocking Alpha


  • IYR provides exposure to a diversified basket of U.S. REITs.
  • The dividend yield is at a record low and the P/CF is high relative to the S&P 500, which makes IYR overvalued in my opinion.
  • Rates in the U.S. are expected to rise going forward. The last time we had a tightening cycle, back in 2015-2019, coincided with a lackluster performance for IYR's shareholders.

Coastal Suburb overhead perspective roof tops

mikulas1/E+ via Getty Images

Investment Thesis

REITs often pay substantial dividends and have the potential for moderate long-term capital gains. As a result, they are frequently seen by investors as a safe source of revenue and an inflation hedge. REITs generally achieve

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Unlocking Alpha profile picture
About me: Value-oriented investor, seeking low-risk investments with the potential to deliver high returns. I like to analyze commodities, ETFs, and cash-flow positive businesses that have a moat and growth opportunities.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (4)

munhoi profile picture
its holding up strong , is it ever going to break down after years of surging ???
OverTheHorizon profile picture
Getting windier:

2.2% they are living in an alternate reality.
Unlocking Alpha profile picture
@Robert Rio Rates have been hurting IYR as expected. Let's see what's next after this week's horrible CPI report.
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About IYR

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