Fresh Records • Homebuilders Lead • Dividend Boosts
REITs, ETF investing, Dividend Investing, Homebuilders
Seeking Alpha Analyst Since 2012
Real Estate • High Yield • Dividend Growth
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Summary
- U.S. equity markets climbed to fresh record highs Thursday as the long-awaited fiscal stimulus extension reportedly nears completion while strong housing data offset data showing a continued uptick in jobless claims.
- On pace for gains of 1.6% this week, the S&P 500 finished higher by another 0.58% while the Dow Jones Industrial Average jumped 149-points and the Nasdaq 100 gained 0.65%.
- Real estate equities were among the leaders today as the broad-based Equity REIT ETF (VNQ) finished higher by 1.0% with 14 of 18 property sectors finishing in positive territory.
- Lennar (LEN), the nation's second-largest homebuilder, reported strong quarterly results with order growth jumping 16% from last year and provided positive 2021 guidance as the firm sees nearly 20% growth in home deliveries next year.
- Two mortgage REITs and two equity REITs boosted their dividends over the last 24 hours. To date, 67 of the 170 equity REITs in our coverage continue to pay dividends below their pre-pandemic rates. On the other side, 50 equity REITs are now paying dividends above their 2019 rates.
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 climbed to fresh record highs Thursday as the long-awaited fiscal stimulus extension reportedly nears completion while strong housing data offset data showing a continued uptick in jobless claims. On pace for gains of 1.6% this week, the S&P 500 ETF (SPY) finished higher by another 0.6% while the Dow Jones Industrial Average (DIA) jumped 149 points and the tech-heavy Nasdaq 100 (QQQ) gained 0.7%. Real estate equities were among the leaders today as the broad-based Equity REIT ETF (VNQ) finished higher by 1.0% with 14 of 18 property sectors finishing in positive territory. The Mortgage REIT ETF (REM) gained 0.9% on the day.
Homebuilders and the broader Hoya Capital Housing Index were again among the leaders today on another strong slate of housing data this morning. Lennar (LEN), the nation's second-largest homebuilder, reported strong quarterly results with order growth jumping 16% from last year and provided positive 2021 guidance as the firm sees nearly 20% growth in home deliveries next year. Lennar commented, "the confluence of Millennials starting families and creating households of their own, along with the pro-housing effects of the COVID-19 pandemic, has materially strengthened demand." 9 of the 11 GICS equity sectors finished higher on the day, led by the Commerical Real Estate (XLRE), Materials (XLB), and Healthcare (XLV) sectors.
Also this morning, the Census Bureau reported that Housing Starts in November were 12.8% higher than last year while Building Permits rose 8.5% year-over-year - each above consensus estimates - as the red-hot U.S. housing industry has exhibited few signs of cooling into the winter months. The gains during the pandemic have been powered entirely by a surge in single-family home construction, which were 27.1% higher than last year. Starts on multifamily units, meanwhile, were lower by 16.0% from last year amid an ongoing post-pandemic "suburban revival." Yesterday, the NAHB reported that its Homebuilder Sentiment Index - a leading indicator of housing activity - was the second-highest on record in December with a reading of 86.
Commercial Equity REITs
"Dividend Declaration Season" hasn't disappointed thus far, and after a handful of dividend increases and one dividend cut earlier this week, we heard declarations from a handful of REITs over the last 24 hours. Diversified REIT Alexander & Baldwin (ALEX), which had suspended its dividend in April, resumed its dividend at $0.15 per share this afternoon. Elsewhere, Shopping center REIT Kite Realty (KRG) jumped 2.2% after it doubled its dividend to $0.15 yesterday afternoon, but still below its $0.32 pre-pandemic rate.
To date, 67 of the 170 equity REITs in our coverage continue to pay dividends below their pre-pandemic rates. On the other side, 50 equity REITs are now paying dividends above their 2019 rates, a list dominated by the "essential" property sectors including housing, industrial, and technology REITs.
Shopping Centers: Urstadt Biddle (UBA), one of the few REITs to report results outside of the typical earnings season window, finished lower by 0.6% after it reported its fiscal fourth-quarter results yesterday afternoon. Despite the vaccine-driven rebound, shopping center REITs are the third-worst performing REIT sector this year with declines of nearly 30%. UBA saw a mild improvement in same-store NOI growth to -9.3% in the quarter ending October 31 and saw rent collection improving to roughly 90%, in-line with the broader sector. UBA noted that all 74 of its shopping centers are open and operating, with 99.1% of our total tenants open.
Earlier this week, we published Cannabis REITs: High on Growth. Cannabis REITs - Innovative Industrial (IIPR) and Power REIT (PW) - have been far-and-away the best-performing property sector for the second year in a row. Investors seeking more direct exposure to the cannabis theme can find either of these REITs in cannabis-focused thematic ETFs, including those offered by AdvisorShares (YOLO), Amplify Seymour (CNBS), and Cambria (TOKE). Of note, the largest ETF by AUM advised by ETFMG (MJ) does not include either of the cannabis REITs among its holdings.
Mortgage REITs
As tracked in our Mortgage REIT Tracker available to The REIT Forum subscribers, residential mREITs finished higher by 1.2% today to push their gains to 2.2% this week. Commercial mREITs finished higher by 0.9% on the day and are now higher by 0.7% this week. New Residential (NRZ) jumped 4.6% today after it declared a $0.20 per share dividend yesterday afternoon, an increase of 33% from its dividend last quarter, but still below its pre-pandemic rate of $0.50. MFA Financial (MFA) gained 3.5% today after it declares a $0.075/share quarterly dividend, a 50% increase from its prior dividend of $0.05, but also below its pre-pandemic rate of $0.20.
As discussed last week, we're expecting some of the 32 mREITs that reduced their dividends during the pandemic to declare special distributions in order to meet minimum distribution requirements. As noted in 'Tis The Season For REIT Dividends, The IRS did relax the required cash component of the distribution rules, and the fact that the payout rules are based on net income rather than cash flows may effectively "exempt" many of these REITs from distribution requirements. We've seen special dividend declarations from 3 of the 41 mortgage REITs thus far.
REIT Preferreds & Bonds
As tracked in our REIT Preferred Stock & Bond Tracker available to The REIT Forum subscribers, REIT Preferred stocks finished higher by 0.20%, on average, but underperformed their respective common stock issues by an average of 0.51%. VEREIT (VER) announced yesterday that it intends to redeem 21% of its 6.70% Series F Cumulative Redeemable Preferred Stock (VER.PF) on January 15, 2021. Among REITs that offer preferred shares, the performance of these securities has been an average of 14.93% 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 6.81%.
Economic Data This Week
We'll have a full analysis and recap of the busy week of economic data in our Real Estate Weekly Outlook report published on Saturday morning.
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