WASHINGTON, D.C. JAN. 13, 2020 – In 2019, the U.S. REIT market delivered double-digit returns across nearly all sectors, raised a record amount of market capital, and continued to provide strong dividend yields to income investors, according to Nareit.
“REITs in 2019 provided both the long-term growth and recurring income that characterizes real estate investment,” said Nareit President and CEO Steven A. Wechsler. “The REIT market’s performance underlines the value of REITs as a total return investment, delivering price appreciation in tandem with dividends critical for investors seeking income in today’s low interest rate environment.”
The FTSE Nareit All Equity REITs Index delivered a total return of 28.66% for 2019, with a 0.13% gain for the fourth quarter, the FTSE Nareit Mortgage REITs had a total return of 21.33% and a 5.20% gain for the fourth quarter, and the FTSE Nareit All REITs Index, which contains both equity and mREITs, had a total return of 28.07% for the year with a 0.55% gain for the fourth quarter. The S&P 500’s total return for 2019 was 31.49%, with a gain of 9.07% in the fourth quarter.
Most REIT segments see double-digit returns
Nearly all equity REIT market segments had double-digit total returns in 2019. The manufactured homes sector led the equity REIT market’s performance with a 49.09% total return for the year. Other top performing segments included industrial REITs with a 48.71% return, single-family home REITs with 44.30%, data center REITs with 44.21%, and timber REITs with 42%.
Among mREITs, the commercial financing segment delivered a 32.10% total return for 2019, and home financing REITs gained 17.20%.
Capital raising increases; leverage falls
REITs raised a record $109.36 billion in equity and debt from public capital markets in 2019, nearly double the $55.63 raised in 2018. Equity raised in 2019 included $220 million from two IPOs, $31.99 billion in secondary common shares, and $4.45 billion in secondary preferred shares. REITs also raised a record $63.15 billion in unsecured debt in 2019, surpassing the previous record of $50.77 billion raised in 2017.
REITs continued to reduce their leverage, producing a debt ratio (total debt divided by total debt plus equity) of 27.50% for the FTSE Nareit All Equity REITs Index at the end of the third quarter, down from 32.30% at the same time last year.
REITs reward yield-seeking investors
REITs continued to offer strong dividend yields for income investors in 2019. The dividend yield of the FTSE Nareit All REITs Index was 4.06% at December 31 and the yield of the FTSE Nareit All Equity REITs Index was 3.70% compared to 1.85% for the S&P 500. The lodging/resorts sector led the equity REITs market in dividend yields with 6.89%. The next highest yielding equity REIT sectors included specialty (6.15%), diversified (5.78%), and retail (5.07%).
The home financing segment of the FTSE Nareit Mortgage REITs Index had a dividend yield of 10.80% at year-end, while the commercial financing segment’s yield was 7.53%.