5 High Yielding Real Estate ETFs

by on October 22, 2012 | ETFs Mentioned:

Now leading the change of economic turnaround in the US, real estate investments were the first to be crushed in the financial crisis. Housing prices are going up for the first time in 5 years, bringing REITs back into the investment spotlight. These real estate investment firms exist in over 20 different countries around the world, allowing investors to make potentially lucrative plays on housing in both emerging and developed markets. Those looking for current income should not shy away from this market; these securities must pay out 90% of their income to shareholders in order to avoid taxation at the corporate level. Below we outline 5 REIT ETFs that already have outstanding dividend yields [see also 8% Yield ETFdb Portfolio].

1. Market Vector Mortgage REIT Income ETF (MORT)

This all-American ETF has one of the highest annual dividend yields of any ETF on the market today. At an amazing 9.94% payout a year and a relatively low expense ratio of 0.40%, its no surprise that analysts think real estate investments are making a turnaround. With only 25 holdings, this ETF tracks an index of companies that derive at least 50% of their revenues from mortgage REITs, which includes companies and trusts that are primarily engaged in the purchase or service of commercial or residential mortgage loans and securities. These companies tend to be medium or large-cap firms. MORT’s year-to-date return comes in at a whopping 25.52%, making it an appealing buy for even the most leery investors.

2. FTSE NAREIT Mortgage REITs Index Fund (REM)

This ETF follows an index that measures the performance of the residential and commercial real estate, mortgage finance, and savings associations sectors of the U.S. equity market, allowing investors to get exposure to both the front and back end of real estate. With a portfolio of 30 mostly medium sized firms, this fund has no where to go but up. And with a YTD return of 26.06% it certainly has. REM also boasts a handsome annual dividend yield of 11.88% [see also Mortgage ETFs: 10% Yields + Low Volatility].

3. IQ US Real Estate Small Cap ETF (ROOF)

Compared to the dividend yields of REM and MORT, the respectable 4.99% yield of this fund seems tiny in comparison, but ROOF does offer some unique opportunities. The index it follows is float adjusted market cap weighted, giving investors a means of tracking the overall performance of small capitalization U.S. real estate companies, which make up roughly 75% of the portfolio. And as the fund’s clever ticker suggests, year-to-date returns have quite literally gone “through the roof”, rewarding investors with a 29.8% gain. Although ROOF may have a higher expense ratio, the fund’s returns alone warrant investors to take a closer look at this stellar performer.

4. FTSE EPRA/NAREIT Europe Index Fund (IFEU)

The only fund on this list to focus on companies outside of the US, IFEU targets developed European nations, many of which are going through a very similar trend of the housing market rebirth as the US. It holds over 90 firms from more then 10 different countries, but allocations to the UK and France make up about 60% of the fund’s total assets. There are, however, some key holdings in Switzerland, Germany, Sweden, and the Netherlands as well, but all together these countries still only make up 20% of the fund. With an annual dividend yield of 4.74% and a YTD return of 26.27%, this fund is certainly a compelling pick [see also Inside The SuperDividend ETF: Q&A With Bruno del Ama].

5. KBW Premium Yield Equity REIT Portfolio (KBWY)

This ETF if focused on only US REITs and it pulls from about a third of the companies that IFEU does, currently holding 35 individual securities. Due to the high number of micro and small cap holdings, making up 45% and 33% of the portfolio respectively, this fund has a huge potential for growth as the real estate market continues to recover. Already it has caught the eye of riskier investors, with a YTD return of 25.65% and an expense ratio of 0.35%, the lowest on this list.

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Disclosure: No positions at time of writing.