Investing in real estate ETFs can provide stable returns, making them attractive to income-oriented investors looking to invest in real estate. Real estate ETFs allow investors to participate in the sector and diversify their portfolios without engaging in complex procedures.
Real estate ETFs can also help protect against inflation, as property values and rental income typically rise during periods of inflation. This makes real estate a reliable hedge even if inflation rises, as rising rents and property values can increase investors’ profits.
Given this background, investors are looking to invest in fundamentally sound real estate ETFs such as iShares U.S. Real Estate ETF (IYR), Schwab U.S. REITETF (SCHH), and Vanguard Real Estate Index Fund ETF Shares (VNQ) to prevent inflation. There is a possibility that we will consider investing.
Real estate has historically been embraced by investors because of its ability to generate exceptional returns. Under these circumstances, REITs, which allow investors to participate in the real estate market without owning or managing real estate, are emerging as an ideal investment destination. REITs are attractive to a variety of investors, especially those looking for immediate income, because they are required to distribute at least 90% of their income to investors.
The global REIT market size is expected to grow at a CAGR of 2.9% until 2028. This market is driven by the increasing global demand for warehousing and storage facilities due to the expansion of e-commerce, the need for efficient logistics solutions, the development of the housing sector, and government initiatives to support it.
Additionally, the North American REIT industry is projected to exhibit a CAGR of 2.5% through 2029.
With these encouraging trends in mind, let’s take a look at the fundamentals of the top three real estate ETFs, starting with number three.
ETF #3: iShares U.S. Real Estate ETF (IYR)
IYR seeks to track an index comprised of U.S. stocks in the real estate sector. The Fund invests in stocks of all market capitalizations and captures broad segments of the real estate sector, including REITs and companies (including real estate agencies) that invest in real estate through development, management and ownership. IYR tracks the Dow Jones U.S. Real Estate Index.
The fund has assets under management (AUM) of $4.72 billion. IYR’s top holdings include Prologis, Inc. (PLD) with 8.20%, followed by American Tower Corporation (AMT) with 7.66%, Equinix, Inc. (EQIX) and Welltower Inc. (WELL ) followed by 5.91% and 4.40%. , respectively.
This ETF holds a total of 68 stocks, and the top 10 assets account for 47.55% of assets under management. IYR’s expense ratio is 0.39%, which is lower than the category average of 0.42%. Inflows in the past three months were $1.16 billion, compared with $1.31 billion in the past year.
IYR pays an annual dividend of $2.36. This translates to a yield of 2.34% at current price levels. Additionally, the fund’s dividends have grown at a CAGR of 8.3% over the past three years. Notably, IYR has paid a dividend for 23 consecutive years.
IYR rose 15.6% over the past six months and 31.6% over the past year, closing its last trade at $100.92. Beta value is 0.91. As of October 2, 2024, the Fund’s NAV was $100.81.
IYR’s POWR Rating reflects a solid outlook. The fund has an overall rating of A, which equates to a “strong buy” according to our proprietary rating system. POWR ratings are calculated by considering 118 different factors, with each factor weighted to the best degree.
IYR has an A grade for trades and buy-and-holds. It ranks 4th out of 31 ETFs within the A-rated real estate ETF group.
Click here to access all POWR ratings for IYR.
ETF #2: Schwab US REIT ETF (SCHH)
SCHH is founded and managed by Charles Schwab Investment Management, Inc. The fund invests in stocks of companies operating across the real estate and REIT sectors. Invests in growth and value stocks of companies across a variety of market capitalizations. Track the performance of the Dow Jones US Select REIT Index.
With total assets under management of $8.01 billion, SCHH’s main holdings are 8.10% in PLD, 7.67% in AMT, and 5.89% and 4.55% in EQIX and WELL, respectively.
The fund has a total of 118 holdings, with the top 10 holdings accounting for 47.49% of its assets under management. The expense ratio is 0.07% and the category average is 0.42%. SCHH has seen inflows of $578.34 million over the past six months and $865.17 million over the past year.
SCHH’s annual dividend is $0.66, giving it a yield of 2.89% at current price levels. Additionally, the fund’s dividends have grown at a CAGR of 11.8% over the past three years.
SCHH rose 16.1% over the past six months and 31.5% over the past year, closing at $22.91. Beta value is 0.92. As of October 2, 2024, the Fund’s NAV was $22.91.
The fundamentals of SCHH’s sound are reflected in the POWR ratings. The fund has an overall rating of ‘A’, which equates to a ‘Strong Buy’ in our proprietary rating system.
This fund has a trade and buy-and-hold grade of A. Among the 31 ETFs in the real estate ETF group, SCHH ranks 3rd.
Click here to see all SCHH reviews.
ETF #1: Vanguard Real Estate Index Fund ETF Stock (VNQ)
VNQ invests primarily in U.S. equity REITs, providing broad exposure, with minor diversification into specialty REITs and real estate companies. This fund provides an efficient way for investors to gain indirect exposure to real estate prices. This ETF tracks the performance of the MSCI US Investable Market Real Estate 25/50 Index.
The fund has total assets under management of $38.41 billion. The top holdings are PLD and AMT with 7.74% and 6.84%, followed by EQIX and WELL with 5.06% and 4.63%, respectively.
VNQ holds a total of 155 stocks, with the top 10 holdings accounting for 43.76% of its assets under management. This fund has an expense ratio of 0.12%, which is lower than the category average of 0.42%. VNQ fund inflow last month was $451.51 million, and in the past three months it was $556.6 million. Also, the beta value is 0.91.
VNQ pays an annual dividend of $3.65. This translates to a yield of 3.78% at current price levels. The fund’s dividends have grown at a CAGR of 3.9% over the past three years. VNQ has paid a dividend for 18 consecutive years.
VNQ has soared 14.9% in the past six months and 29.9% in the past year, closing at $96.45. The Fund’s NAV as of October 2, 2024 is $96.35.
VNQ’s POWR rating reflects its strong outlook. The ETF has an overall rating of A, which equates to a “strong buy” according to our proprietary rating system.
VNQ has an A grade for buy-and-hold and trade. Peer’s B grade is also available. The fund ranked first among the group’s 31 ETFs.
Click here to access all POWR ratings for VNQ.
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About the author: Rjkumari Saxena
Rajkumari started her career as a writer, but with her academic background in the commercial field, she gradually shifted her focus to financial journalism. Fascinated by the interplay of business and economic changes in equities, she hopes to evolve as an analyst. An expert at simplifying complex financial concepts, her mission is to provide investors with insights that lead to profitable decisions. more…
