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RIET: Investing in High-Yield REITs for a Growing 9.9% Yield

Image by Thomas De Wever Are you searching for an investment opportunity that offers a strong yield with room for growth? Look no further than the Hoya Capital High Dividend Yield ETF (NYSEARCA:RIET). This high-yield...

Aerial top view middle class neighborhood in South California, USA Image by Thomas De Wever

Are you searching for an investment opportunity that offers a strong yield with room for growth? Look no further than the Hoya Capital High Dividend Yield ETF (NYSEARCA:RIET). This high-yield REIT index ETF invests in a diverse range of REIT stocks, including common and preferred stocks, as well as mREITs. With a fully covered 9.9% yield and the potential for dividend growth, RIET is a compelling option for investors. However, it's important to note that RIET carries some risks and may not be suitable for more conservative investors.

RIET - Basics

  • Investment Manager: Hoya Capital
  • Underlying Index: Hoya Capital High Dividend Yield Index
  • Expense Ratio: 0.50%
  • Dividend Yield: 9.92%
  • Total Returns 1Y: -23.7%

RIET - Overview

RIET is an ETF that tracks the Hoya Capital High Dividend Yield Index, which consists of 100 high-yield REITs. These REITs include both common and preferred stocks, as well as mREITs. The index utilizes sub-asset class, sector, and size caps/floors to ensure diversification. Preferred stocks hold weights of 0.33%, while other asset classes range from 1.2% to 1.5%.

While RIET's investment methodology may seem complex, it ultimately results in a well-diversified portfolio. The fund invests in 100 securities from various property sectors, ensuring a balanced allocation. Additionally, RIET does not have an overweight allocation to mREITs, which are known for their higher risk and potential losses.

RIET Image: RIET

RIET - Dividend Analysis

One of the most compelling aspects of RIET is its robust 9.9% dividend yield. This yield surpasses the average yields of most REITs and equity funds. In fact, it is comparable, if not higher, than the yields offered by other high-yielding asset classes like BDCs, CEFs, and mREITs.

Moreover, RIET's dividends are fully covered by its underlying income generation. The fund's 10.0% SEC yield exemplifies this, providing investors with a clear picture of the fund's income potential. Despite its relatively short track record, RIET has managed to maintain consistent dividend growth, with a CAGR of approximately 2.0% since its inception.

Chart Chart: Data by YCharts

RIET - Performance Analysis

While RIET's overall performance track record is below-average, it has shown signs of improvement in recent months. Although it has moderately underperformed broader REIT indexes and U.S. equities since its inception, recent performance trends offer hope for potential investors. It's worth noting that RIET's short track record limits the significance of these underperformance issues.

It's important to acknowledge that RIET's underlying holdings, particularly mREITs, carry higher-than-average risk. Consequently, investors should expect above-average losses during downturns, recessions, and bear markets. However, RIET's strong dividend growth and its ability to cover its dividends offer reassurance during these market conditions.

Seeking Alpha - Chart by Author Chart: Seeking Alpha - Chart by Author

Conclusion

RIET presents a compelling investment opportunity for those seeking high-yield REITs. Its strong and fully covered 9.9% dividend yield sets it apart from many other investment options. Additionally, RIET's underlying index methodology ensures diversification and mitigates the risks associated with mREITs.

While its performance track record is still short, RIET's consistent dividend growth and strong fundamentals indicate the potential for long-term success. As always, it's crucial to consider your own risk tolerance and investment objectives when evaluating any investment opportunity. Nevertheless, RIET's combination of a substantial yield and growth potential make it an attractive choice for investors looking to explore the world of high-yield REITs.

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