Real estate investment trust (REIT) exchange-traded funds (ETFs) ended 2021 as one of the top-performing ETF themes. Many REIT stocks gained more than 30% during the past year. On the other hand, the S&P 500 index returned 27%. Today, we introduce three REIT ETFs to buy that offer diversified exposure to the real estate sector stateside.
Seasoned investors invest in REITs due to their reliable dividends. According to the The U.S. Securities and Exchange Commission (SEC), REITs must pay out “at least 90 percent of its taxable income annually in the form of shareholder dividends.”
Soaring rents and occupancy rates for real estate reveal increasing demand for commercial and residential real estate space in 2022. The National Association of Realtors recently predicted housing prices could rise 5.7% through the end of 2022. REITs often benefit from inflation due to the structure of their leases, allowing for frequent rent hikes linked to the consumer price index (CPI).
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With that in mind, here are the three best REIT ETFs to buy for lucrative gains in 2022.
Invesco S&P 500 Equal Weight Real Estate ETF
Nuveen Short-Term REIT ETF
The Real Estate Select Sector SPDR Fund
Invesco S&P 500 Equal Weight Real Estate ETF (EWRE)
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52-Week Range: $34.84 – $42.72
Dividend Yield: 2.39%
Expense Ratio: 0.40%
Our first REIT ETF is the Invesco S&P 500 Equal Weight Real Estate ETF (NYSEARCA:EWRE), which offers broad exposure to stocks in the U.S. real estate market. It is an equal-weighted ETF that shrinks the footprint of the largest REITs in the portfolio.
EWRE, which tracks the S&P 500 Equal Weight Real Estate Index, has 31 holdings. The fund, which started trading in August 2015, is rebalanced quarterly.
In terms of sectoral allocations, we see specialized REITs leading with 31.23%, followed by retail REITs (17.16%) and residential REITs (16.83%). The top 10 holdings account for around 37% of its net assets of $152 million.
Leading REIT holdings include American Tower (NYSE:AMT), Crown Castle International (NYSE:CCI), SBA Communications (NASDAQ:SBAC), Host Hotels & Resorts (NASDAQ:HST) and Realty Income (NYSE:O).
EWRE has declined almost 13.5% year-to-date (YTD), recently hitting its 52-week low on May 20 at $34.84. The fund currently trades at a price-to-earnings (P/E) ratio of 38.7 and a price-to-book (P/B) ratio of 3.15.
Nuveen Short-Term REIT ETF (NURE)
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52-Week Range: $33.08 – $41.45
Dividend Yield: 2.27%
Expense Ratio: 0.35% per year
Our second fund, the Nuveen Short-Term REIT ETF (BATS:NURE), provides access to U.S. REITs with short-term lease agreements. Such short-term REITs display less price sensitivity to interest rate changes than REITs with longer-term lease agreements. Therefore, they get increased attention in the current environment of increasing rates.
NURE, which tracks the Dow Jones U.S. Select Short-Term REIT Index, has 38 holdings. The fund was launched in December 2016.
With regards to sub-sectors, the fund is heavily skewed toward apartment REITs with 50.73%, followed by self-storage REITs (21.91%) and hotel REITs (17.60%). The top 10 stocks in the portfolio account for roughly half of its net assets of $128.7 million.
Host Hotels & Resorts, Equity Lifestyle Properties (NYSE:ELS), Invitation Homes (NYSE:INVH), American Homes 4 Rent (NYSE:AMH) and Sun Communities (NYSE:SUI) are among the most prominent holdings.
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Over the past 12 months, NURE has returned over 7% and saw a 52-week high at $41.45 on April 21. However, it has lost 13% YTD. The fund has a P/E ratio of 52.19 and a P/B ratio of 2.88.
The Real Estate Select Sector SPDR Fund (XLRE)
Source: mTaira / Shutterstock.com
52-Week Range: $41.37 – $52.17
Dividend Yield: 2.26%
Expense Ratio: 0.1% per year
Our final REIT ETF is the Real Estate Select Sector SPDR Fund (NYSEARCA:XLRE), which invests in companies that focus on real estate management and development as well as REITs. But it excludes mortgage REITs.
XLRE, which tracks the Real Estate Select Sector Index, has 30 holdings. The fund was first listed in October 2015.
In terms of sectoral allocations, equity REITs hold a majority share with 97.14%, followed by real estate management & development (2.86%). The top 10 holdings account for around more than 61% of net assets of $5.6 billion. Among them are American Tower, Prologis (NYSE:PLD), Crown Castle International, Equinix (NASDAQ:EQIX), and Public Storage (NYSE:PSA).
So far in 2022, XLRE has declined 15%, hitting its 52-week low at $41.37 on May 12. Nevertheless, the fund has risen 1% over the past 12 months. The fund has a P/E ratio of 45.87 and a P/B ratio of 4.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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