More Stimulus • Dividend Boosts • Jobless Claims Jump
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 finished mostly lower Thursday as investors awaited details on the stimulus plan from President-Elect Biden as employment data this morning showed continued choppiness in the economic recovery.
- Now lower by 0.7% on the week, the S&P 500 finished off by 0.4% today while the Dow declined by 69 points. Mid-Caps gained 1.0% while Small-Caps jumped 2.2%.
- Real estate equities outperformed for the second-straight day - led by the most beaten-down sectors of 2020. The Equity REIT ETF finished higher by 0.6% with 10-of-19 sectors in positive-territory.
- Tanger Outlets (SKT) jumped 9.6% after announcing that it will resume its suspended dividend at a rate of $0.1775/share dividend, which is roughly half of its prior pre-pandemic rate of $0.36 per share. Tanger remains one of the worst-performing REITs of the past five years.
- Initial Jobless Claims jumped to the highest level since August at 965k after showing signs of improvement in the prior three weeks. Driving this increase, the recently-enacted stimulus program provides an additional $300 per week in enhanced unemployment payments on top of state benefits.
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 every afternoon on The REIT Forum and occasionally on our website and this 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 finished mostly lower Thursday as investors awaited details on a fresh stimulus plan from President-Elect Biden as employment data this morning showed continued choppiness in the economic recovery. Now lower by 0.7% on the week, the S&P 500 ETF (SPY) finished off by 0.4% today while the Dow Jones Industrial Average (DIA) declined by 69 points. Real estate equities outperformed for the second-straight day - led by the most beaten-down sectors of 2020 - as the broad-based Equity REIT ETF (VNQ) finished higher by 0.6% with 10 of 19 property sectors in positive territory while the Mortgage REIT ETF (REM) finished higher by 0.9%.
While the large-cap indexes were under pressure, expectations of up to $2 trillion in additional stimulus lifted the Small-Cap (SLY) and Mid-Cap (MDY) to strong gains while Bitcoin (BTC-USD) also jumped another 5% today after an early-week sell-off. A strong day from housing-related retailers and financials lifted the Hoya Capital Housing Index to fresh record-highs. Seven of the eleven GICS equity sectors finished lower on the day, however, as the large-cap Technology (XLE) and Communications (XLC) sectors remain under pressure amid an ongoing social media censorship controversy while the Energy (XLE) sector continued its strong gains in 2021 after a brutal 2020.
Today's mixed performance followed disappointing employment data this morning as Initial Jobless Claims jumped to the highest level since August at 965k after showing signs of improvement in the prior three weeks. Continuing Claims ticked up to 5.27 from 5.07, but since the peak in early May at nearly 25 million, Continuing Claims have retreated by 19.5 million. Perhaps driving these increases, the recently enacted stimulus package provides an additional $300 per week in enhanced unemployment benefits on top of state benefits.
Commercial Real Estate
Malls: Tanger Outlets (SKT) jumped 9.6% after announcing that it will resume its suspended dividend at a rate of $0.1775/share dividend, which is roughly half of its prior pre-pandemic rate of $0.36 per share. Tanger provided a business update earlier in the week in which it reported that it collected 90% of Q4 rents and over 40% of the deferred rents due in 2021 had been collected. SKT noted that it has recorded positive cash flow across 2H20. As of Dec. 31, 2020, consolidated portfolio occupancy was 91.9% while traffic during Q4 represented roughly 90% of prior-year levels.
Net Lease: This afternoon, Agree Realty (ADC) officially switched from a quarterly to a monthly dividend payer, as announced earlier this week. In its inaugural monthly dividend, ADC declared a $0.207/share monthly, which was a modest boost from its prior quarterly rate of $0.62 per share. As we discussed in Income in the Yield Desert, no sector defied the retail and pandemic-related headwinds in 2020 more than the Net Lease REIT sector. Of the 52 equity REITs that paid higher total dividends in 2020, nine were net lease REITs. The NETLease Corporate Real Estate ETF (NETL) was one of the best-performing fund in the Morningstar Real Estate ETF Category in 2020.
Industrial: This afternoon, Monmouth Real Estate (MNR) declared a $0.18/share quarterly dividend, a 5.9% increase from prior dividend of $0.17, becoming the ninth industrial REIT to increase its dividend since the start of 2020. MNR concurrently announced that it has determined that Blackwell Capital's proposal to acquire MNR for $18.00 per share is not in the best interest of the company and it will explore strategic alternatives including the potential sale or merger of the company. While industrial REITs are likely to report average FFO growth near 10% in 2020, MNR has been a laggard.
Manufactured Housing: UMH Properties, Inc. (UMH) jumped 2.4% after it announced yesterday afternoon that it will increase its quarterly dividend to $0.19 per share up from $0.18 per share, the first dividend increase in fifteen years for the small-cap REIT. UMH joins the other two manufactured housing REITs, Sun Communities (SUI) and Equity Lifestyle (ELS), who have collectively achieved some of the strongest rates of dividend growth in the REIT sector over the past decade. In all, 52 equity REITs paid higher total dividends in 2020 than last year, led by residential REITs with 10 increases.
Cell Tower: Earlier this week, we published Cell Tower REITs: Tech Trouble or 5G Opportunity? We discussed how cell tower REITs outperformed the REIT Index for the sixth-straight-year in 2020, but have dipped nearly 20% over the last quarter amid the sharp vaccine-driven REIT sector rotation. We believe that Apple's (AAPL) successful iPhone 12 launch represents the true "arrival" of 5G, the much-anticipated next-generation mobile network. Powering this sector-leading AFFO growth has been a combination of external growth - underscored by American Tower's (AMT) buying spree in early 2021 - and by sector-leading "same-store" growth.
Mortgage REITs
As tracked in our Mortgage REIT Tracker available to The REIT Forum subscribers, residential mREITs finished higher by 1.3% today and are now flat on the week. Commercial mREITs finished higher by 0.5% and are now higher by 0.6% on the week. This afternoon, Orchid Island Capital (ORC) declared a $0.065/share monthly dividend, in line with the previous rate. ORC, which was one of the better-performing mREITs in 2020, also provided a preliminary 4Q earnings report in which it noted that its book value per share at the end of December was $5.46, up 0.3% from its BVPS at the end of 3Q.
The iShares Mortgage Real Estate Capped ETF (REM) ended 2020 with total returns of -20.8%, but the market-cap weighted index hides some of the permanent scars of 2020 on a handful of mREITs. Using a simple average, among the 23 residential mREITs, the average price return in 2020 was -33.3%. Among the 18 commercial mREITs, the average price return in 2020 was -18.5%. Of the 41 mREITs in the NAREIT universe, just two paid higher dividends in 2020 compared to 2019, seven paid the same rate, while 32 paid lower dividends.
REIT Preferreds & Bonds
As tracked in our REIT Preferred Stock & Bond Tracker available to The REIT Forum subscribers, REIT Preferred stocks finished higher by 0.77% today, on average, but underperformed their respective common stock issues by an average of 1.45%. The REIT Preferred ETF (PFFR) ended 2020 with total returns of -0.2% and REIT preferreds are roughly flat through the first four days of 2021. 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
After a jam-packed week of employment data, it will be another busy week of economic data in the week ahead headlined by the two major inflation reports. On Wednesday, we'll see Consumer Price Index data for December, and on Friday, we'll see Producer Price Index data. Inflation expectations surged last week after Democrats won the "trifecta" of political control given the implications for additional stimulus, and investors will be looking for signs of inflation in the hard data in the months ahead. We'll also see Retail Sales data for December on Friday. As usual, we'll also be watching the weekly Mortgage Applications and Jobless Claims as well.
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