Are you looking for a high-yield investment opportunity? Look no further than the Hoya Capital High Dividend Yield ETF, also known as RIET. In this article, we will explore the potential benefits and risks associated with this REIT index ETF.
RIET - Basics
- Investment Manager: Hoya Capital
- Underlying Index: Hoya Capital High Dividend Yield Index
- Expense Ratio: 0.50%
- Dividend Yield: 9.50%
RIET - Index and Portfolio
RIET is an ETF that tracks the Hoya Capital High Dividend Yield Index, which includes 100 high-yield REITs. This index offers diversification across various sub-asset classes, sectors, and size caps/floors. From the fund's index methodology, we can see that it is engineered to ensure a reasonably well-diversified portfolio.
One noteworthy aspect of RIET's portfolio is its exposure to mREITs, which are leveraged real estate investment trusts. While this adds an element of risk, it is not excessive. However, it's important to note that mREITs can be volatile and prone to capital losses and distribution cuts. RIET also focuses on high-quality holdings in other areas, which helps mitigate some of the risk.
RIET - Dividend Analysis
One of the key attractions of RIET is its strong 9.5% yield, which outperforms many other asset classes, including equities, bonds, and REITs. While it yields slightly less than some other high-yielding investments like BDCs, mREITs, and CEFs, it still offers an attractive income opportunity.
RIET's dividends have seen modest growth since its inception in late 2021. Although the growth has been relatively low, the fund's starting yield is high, making even modest growth impactful. Based on the fund's SEC yield, which measures underlying income generation, RIET's dividends seem to be mostly covered by income generation.
RIET - Quick Market Analysis
The real estate industry has faced challenges in recent years due to higher rates. However, with the expectation of declining interest rates next year, the market anticipates a recovery in the real estate sector. If the Federal Reserve follows through with rate cuts, it is likely to benefit REITs such as RIET.
RIET - Performance Analysis
RIET's performance track record is overall mediocre, mainly due to unfavorable industry conditions caused by aggressive Fed hikes. However, the fund's underperformance is not significantly different from broader REIT and mREIT indexes. With better industry conditions and lower rates, RIET's performance is expected to improve.
Conclusion
Considering RIET's strong 9.5% yield and potential for capital gains as interest rates fall, it may be an attractive investment option. However, it's essential to keep in mind that RIET comes with its fair share of risks and volatility, making it unsuitable for all investors. As with any investment decision, it is crucial to conduct thorough research and seek professional advice before making any commitments.
