Tags: Real | Estate | Stocks | reit

WSJ: Investors Return Home to Real-Estate Stocks

Friday, 06 Jan 2012 08:07 AM

By Dan Weil

If you’re an investor frustrated by interest rates hovering near zero, you might consider real estate investment trusts (REITs) as an alternative income investment.

REITs surged in the fourth quarter, with the Dow Jones All REIT index generating a total return of 15.1 percent, its best performance since the third quarter of 2009, The Wall Street Journal reports.

A gradual recovery in the country’s real estate market and the economy’s better-than-expected performance sparked the gain.

In the third quarter the index had dropped 15 percent amid concern about a possible double-dip recession in the United States and Europe’s financial crisis.

For the year as a whole, REITs returned 7.5 percent. While that lagged the juicy 28 percent returns achieved in 2010 and 2009, REITs more than tripled the 2.1 percent return of the Standard & Poor’s 500 Index last year.

"Where else can you put your money that's relatively low risk and has a [high] dividend yield ahead of an eventual economic improvement?" Hessam Nadji, a managing director at Marcus & Millichap, tells The Journal.

"Within the commercial real-estate sector, . . . we're seeing quarter after quarter improvement in occupancy and rents."

If you find the task of researching individual REITs overwhelming, you might think about exchange-traded funds.

Vanguard’s REIT Index ETF (Ticker: VNQ) returned 8.6 percent last year and 28.4 percent in 2010. The iShares Cohen & Steers Realty Majors ETF (Ticker: ICF) returned 10.2 percent last year and 29.1 percent in 2010.

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