The Global X SuperDividend REIT ETF (NASDAQ:SRET) actually lives up to its name. It has lots of well-yielding specialty exposures that stand to be resilient in a macroeconomic downturn. Moreover, its assets are valued conservatively. REITs as a whole are excellent for the next seasons of the market, and yield should outperform what could become a really gloomy equity season in terms of capital appreciation.
The allocations are quite diversified, but you get a taste for what's inside by looking at some of the top holdings.
We see some logistics REITs that naturally are doing well now with tenants that have more business than they can handle. One of our favorites appears from regional gaming, Gaming and Leisure Properties (GLPI) which owns regional gaming assets in restricted markets with tenants that are well capitalized like Penn National Gaming (PENN) which has its cult following. Regional gaming benefits from recession resilience and it doesn't rely on convention or tourism revenue like places on the Strip or in Macau. They are also well aligned with state governments that take deep taxes on gaming revenues. With some uncertainty remaining over COVID-19 developments, triple-net lease arrangements also spare them substantially from those risks which fall with operators.
Specialty assets invariably have lease terms with built in growth clauses and long-term durations. They are somewhat like inflation indexed bonds, and while not able to fully keep up with inflation, do better than fixed coupons while also yielding much higher earnings yields and dividend yields.
SRET is mid-cap with its weighted average market cap being $3.6 billion. That occupies an attractive segment of the market that features companies with strong fundamentals but also fly below the radars of large allocators. This is reflected in the valuations. P/B ratios are hovering at almost exactly 1x, which with slow REIT portfolio rotation and mandated high payouts means you're paying historical prices for the assets, as in before monumental real estate increases - a pretty good deal. PE ratios are around 11x on average, which means close to 10% in earnings yield. Compare that to the average YTM of a corporate high credit bond at 4%. Credit risk isn't really there with many of these assets, as tenants are likely to stay solvent even in a softening macro environment. Those earnings yields look relatively high for the limited risk that specialty real estate exposures offer.
Moreover, the high dividend yielding profile lends itself to a softening macroeconomic environment, with yields assuring of more return than relying on capital appreciation when macro factors are moving against stocks. Low unemployment rates and high inflation means rate hikes are coming even harder than they've been going so far, which have already exceeded expectations. REITs typically perform well in negative environments thanks to real estate's ability to store value. They also perform well after the bottom. So when things are uncertain, buy an ETF like SRET which contains a host of them. It's a bastion where things can still get a lot worse for markets.
While we don't often do macroeconomic opinions, we do occasionally on our marketplace service here on Seeking Alpha, The Value Lab. We focus on long-only value ideas, where we try to find international mispriced equities and target a portfolio yield of about 4%. We've done really well for ourselves over the last 5 years, but it took getting our hands dirty in international markets. If you are a value-investor, serious about protecting your wealth, us at the Value Lab might be of inspiration. Give our no-strings-attached free trial a try to see if it's for you.
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