Published by Forbes.com | April 18, 2023
REITs are dividend-paying entities that own or finance real estate. Learn what REITs are, and the best ones to invest in right now
What’s on tap for the stock market in 2023? Even halfway through the first quarter, there isn’t a strong indication which direction markets will go. The best we can say is that uncertainty will be the theme.
That uncertainty may play well for real estate investment trusts (REITs), which own and finance real estate. They make money through rents, property sales, interest income. Most also pay their shareholders generous cash investment income.
The last year has not been good to REITs. As of February 15, 2023, the S&P U.S. REIT index was down more than 11% over the prior 12 months. By comparison, the S&P 500 dipped only 7.2% in the same time frame. There is some positive news: year to date the S&P U.S. REIT index is outperforming the S&P 500.
While interest rates may rise in 2023, the pace is likely to be slower than what we saw in 2022.
And, as advocacy group Nareit reports, REITs have historically low leverage in terms of debt-to-market-assets. They also hold a good measure of fixed-rate debt, which is unaffected by interest rate hikes—at least until that debt must be refinanced. Fortunately, as of the third quarter of 2022, REITs collectively had a weighted average term to maturity of more than seven years.