Dividend Hikes | Elusive Stimulus | Jobs Recovery Moderates

Dec. 04, 2020 4:49 PM ETThe Hoya Capital Housing ETF (HOMZ), VNQAAIC, AAIC.PR.B, AAIC.PR.C, AAPL, AAT, ABR, ABR.PA, ABR.PB, ABR.PC, ABT, BX, ACRE, ADC, AEO, RTL, GNL.PR.D, AGNC, AGNCM, AGNCN, AGNCO, AGNCP, AHH, AHH.PR.A, AHT, AHT.PR.D, AHT.PR.F, AHT.PR.G, AHT.PR.H, AHT.PR.I, AIC, AIV, AIW, AJX, AJXA, AKR, ALEX, AMC, AMH, AMH.PD, AMH.PE, AMH.PF, AMH.PR.G, AMH.PR.H, AMT, AMWD, AMZN, ANF, APLE, APPL, ARI, ARR, ARR.PR.C, AVB, AWI, AWP, AZN, AZNCF, BA, BAC, BAC.PA, BAC.PR.B, BAC.PC, BAC.PR.E, BAC.PR.K, BAC.PR.L, BAC.PR.M, BAC.PR.N, BACRP, BALY, BAM, BAMGF, BAMKF, BDN, BHR, BHR.PR.B, BHR.PR.D, BK, BK.PC, BKFPF, BKI, BLK, BML.PR.G, BML.PR.H, BML.PR.J, BML.PR.L, BNL, BNTX, BPY, BPYPN, BPYPO, BPYPP, BPYU, BPYUP, BRG, BRG.PA, BRG.PC, BRG.PD, RC, BRT, BRX, BXMT, BXP, BXP.PB, BYD, C, C.PR.K, CCI, CCI.PA, CHCT, CHDN, CHIM, CHMI, CHMI.PR.A, CHMI.PR.B, CIM, CIM.PR.A, CIM.PR.B, CIM.PR.C, CIM.PR.D, CIO, CIO.PR.A, DWAY, CLDT, VRE, BRSP, DBRG, DBRG.PG, DBRG.PR.H, DBRG.PR.I, CLPR, FBRT.PR.E, CNLC, CNTY, COLD, CONE, COST, CPI, CPLG, CPRJ, CPT, CRM, CTRE, PCH, CUBE, CUZ, CVCO, CXW, CZR, DEA, DEI, DHC, DHI, DJI, DLR, DLR.PC, DLR.PG, DLR.PI, DLR.PR.J, DLR.PR.K, DLR.PR.L, DOC, PLD, DRH, DRH.PR.A, DX, DX.PB, DX.PR.C, EARN, EFC, EFC.PR.A, EGP, EPR.PR.C, EPR.PR.E, EPR.PR.G, EPRT, EQC, EQC.PR.D, EQIX, EQR, ERI, ESRT, EXR, META, FMCC, FMCCG, FMCCH, FMCCI, FMCCK, FMCCL, FMCCM, FMCCN, FMCCO, FMCCP, FMCKI, FMCKJ, FMCKK, FMCKL, FMCKM, FMCKN, FMCKO2 Comments

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Summary

U.S. equity markets rallied Friday, closing the week at fresh record-highs as investors wager that lukewarm employment data may be enough to break the stalemate on stalled fiscal stimulus negotiations.
Ending the week with gains of 1.7%, the S&P 500 finished higher by 0.9% today while the Dow Jones Industrial Average advanced 249-points and the Nasdaq 100 gained 0.4%.
Real estate equities delivered a solid end to a week of outperformance as the broad-based Equity REIT ETF gained by 0.9% today with 15 of the 18 property sectors in positive-territory.
The U.S. economy added 245k jobs in November - slightly below economists' estimates for gains of 460k as the employment rebound has cooled following the initial sharp reopening recovery.
We saw an additional five equity REITs boost their dividend this week including announcements this morning from SL Green (SLG) and American Tower (AMT). 46 equity REITs have now raised dividends in 2020 compared to 66 that have reduced or suspended payouts.

Real Estate Daily Recap

Our Real Estate Daily Recap discusses the notable news and events in the real estate sector over the last trading day and highlights sector-by-sector performance. We publish this note in its entirety on The REIT Forum and post this condensed version on our website and Seeking Alpha blog to cover significant news and events. Subscribe to our free email list to keep up with the latest developments in the commercial and residential real estate sectors. Follow our real-time commentary on Twitter and LinkedIn.

U.S. equity markets rallied Friday, closing the week at fresh record-highs as investors wager that lukewarm employment data may be enough to finally break the stalemate on stalled fiscal stimulus negotiations. Ending the week with gains of 1.7%, the S&P 500 ETF (SPY) finished higher by 0.9% today while the Dow Jones Industrial Average (DIA) advanced 249-points and the Nasdaq 100 (QQQ) gained 0.4%. Real estate equities delivered a solid end to a week of outperformance as the broad-based Equity REIT ETF (VNQ) gained by 0.9% today with 15 of the 18 property sectors in positive territory. The Mortgage REIT ETF (REM), meanwhile, gained 2.0% on the day.

Encouraging vaccine news and stimulus hopes combined push the 10-Year Treasury Yield (IEF) to 0.97% - the highest close since March - as some investors see ripe conditions for hotter-than-expected inflation in 2021 amid a post-pandemic economic recovery. 10 of the 11 GICS equity sectors finished in positive territory on the day, led by the Energy (XLE), Materials (XLB), and Real Estate (XLRE) sectors. A strong day from residential REITs offset a decline from the homebuilders to push the Hoya Capital Housing Index into positive territory for the week. We'll have a full analysis of this week's price action in our Real Estate Weekly Recap published tomorrow morning.

The Bureau of Labor Statistics reported that the U.S. economy added 245k jobs in November - slightly below economists' estimates for gains of 460k. The "headline" unemployment rate ticked down to 6.7% from 6.9% in the prior month, but this was driven primarily by a pullback in the labor force participation rate. While the pace of the employment rebound has cooled in recent months, economists from the Congressional Budget Office had initially expected the unemployment rate to remain over 10% through the end of 2021. Over the past six months, 12.3 million jobs have been recovered, but total nonfarm payrolls remain roughly 10 million below pre-pandemic levels.

Commercial Equity REITs

Today, we published Net Lease REITs: Rents Paid, Dividends Raised. Net Lease REITs, which were punished during the worst of the economic lockdowns, have rebounded over the last several months as shutdown-sensitive tenants reopen their doors and rent collection normalizes. Despite their heavy retail exposure, more net lease REITs have raised their dividends this year than any other property sector, but several COVID-sensitive REITs within the sector continue to struggle. Rent collection has improved from a low of 65% in April to 96% by October as the majority of tenants have now reopened. There were signs of stabilization - and even pockets of strength - in third-quarter earnings reports, particularly in acquisition activity.

Another one and another one. Following a quiet few weeks of REIT-related newsflow, "dividend declaration season" has broken the silence over the last few days. We saw an additional five equity REITs boost their dividend this week including announcements this morning from SL Green (SLG) and American Tower (AMT), which joined Essential Properties (EPRT), Universal Health REIT (UHT), and Agree Realty (ADC) which raised their dividends earlier this week. 46 equity REITs have now raised dividends in 2020 compared to 66 that have reduced or suspended payouts.

Earlier this week, we published Single-Family Rentals: Suburban Renaissance. SFR fundamentals are "as strong as they've ever been" according to AMH amid "totally insatiable" demand as America’s families have gained a newfound and deeper appreciation for their homes - and particularly for suburban living. Blended rent growth averaged 3.8% year over year in the third quarter, driven by a strong 5.9% rise in new lease rates, the strongest quarter on record for new lease growth. Blended rent growth would have been significantly higher if not for the generous pandemic-related concessions, including rent-freezes on renewed leases which were offered through August.

Mortgage REITs

As tracked in our Mortgage REIT Tracker available to REIT Forum subscribers, residential mREITs finished higher by 2.6% today to finish the week higher by 1.9%. Commercial mREITs finished higher by 2.1% today to close the week with gains of 3.7%. As discussed in our mREIT Earnings Recap, residential mREITs reported an average 7% gain in Book Values in the third-quarter following the 9% gain in Q2. Commercial mREITs reported an average 2% rise in Book Values in Q3 following the fractional gain in Q2.

REIT Preferreds & Bonds

As tracked in our REIT Preferred Stock & Bond Tracker available to The REIT Forum subscribers, REIT Preferred stocks finished higher by 0.28% today, on average, but underperformed their respective common stock issues by an average of 2.43%. Among REITs that offer preferred shares, the performance of these securities has been an average of 15.95% higher in 2020 than their respective common shares. The average REIT preferred trades at a 5% discount to Par Value and has an average current yield of 6.66%.

This Week's Economic Calendar

We'll have a full recap of this week's economic data in our Real Estate Weekly Outlook report published on Saturday morning.

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

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